Evaluate your business needs: List your company’s current and expected future space needs, and determine your budget and preferred location. If you’re uncertain about near-term needs, consider a shorter lease (for example, two or three years). “You may pay more per square foot for a shorter lease, but at least you can walk away more easily if you need to. Align your real estate with your business objectives.
Understand your costs: Carefully review the incidentals you are being asked to pay for to make sure the total cost fits your budget. Any future increases in base rent and incidentals should also be clearly specified. Don’t be shy about asking for changes.
Understand your lease options: The costs covered in the lease can vary greatly, based on the type of lease.
Gross Lease: The tenant pays a set sum or “gross” amount for rent and the landlord pays all real estate expenses.
NNN Lease: A net lease under which the lessee assumes all expenses of operating a property, including both fixed and variable expenses and any common area maintenance that might apply. However, the landlord is responsible for structural repairs. Referred to as a triple net lease or NNN and stated as a fully net lease.
Full Service Lease: A full service lease most commonly means a lease in which the rent includes all building services/utilities. You should be mindful of how the rent is calculated and ask for estimates/actual costs on all services of the landlord.
Understand the Market: Get an idea of market rents in the neighborhood you’re considering and compare them with the landlord’s asking rent. Talk to a commercial realtor to get up-to-date market lease rates. This information can help you negotiate a lower rent if the asking figure is high.
Research the Property: Gather information on the property that might come in handy for your lease negotiations.
Negotiate Tenant Improvements:Businesses often need to renovate a new space to suit their needs. You should make sure the lease and zoning allow your planned tenant improvements. As well, you can seek a clause requiring the landlord to reimburse some or all of your leasehold improvement costs if the landlord breaks the lease.
Review the renewal conditions: Be sure to understand when and how the lease will be renewed. Also ensure that you have the option to renew the lease at the end of the term, if that is important to you. You may be able to negotiate other options, such as the right of first refusal to lease an adjoining unit for expansion. Alternatively—if the rental market has declined, for example—the landlord might give you a better deal when you renew.