6TIPS

SuccessfulCommercial

LeaseNegotiation

For A

Start EarlyIf you ask a landlord representative, he might tell you

that six months is more than enough time to find a

new space. He's right -- six months is enough time

for you to end up coming to your landlord, hat in

hand, begging for an extension of your existing lease

or a renewal.

Getting a new space for your business takes at least a year. In a normal market,

it's best to give yourself 18 months or two years in a recession where new

construction space can be hard to find or where financing for purchases or

tenant improvement work can be unavailable.

Why does it take so long?  Let's work backwards. It's nice to have at least a

month after construction is essentially finished for testing, moving and for

resolving punch list items. Build outs can easily take a couple of months. When

you and the landlord have attorneys involved, the negotiating process can take

anywhere from one to two months. At this point, we've already spent four to five

months.

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Step 1

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In a perfect world, your market is filled with empty spaces, you see the perfect

one on the first day and the landlord doesn't make you waste too much time

negotiating. In the real world, great spaces are harder to come by. You might

have to wait for them to come on the market, and you might have to start a few

unsuccessful negotiations.

All of that takes time. Furthermore, the more time that you have, the less

pressure you feel to find a space. This lets you negotiate from a position of

greater strength and confidence and, ultimately, get yourself a better deal.

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Learn About LeasesThe first step in learning about commercial

lease negotiating is to learn about what you'll

be negotiating. One of the best ways to

learn about leases is to read a few of them.

Dig through your company's files and find

some lease documents so that you can

get familiarized with the language and terms that they contain.

Typically, leases discuss:

• What you pay in rent

• What other expenses you pay

• How your rent changes over time

• When you move in

• How long you can stay in the space

• Your ability to assign the lease or sublet the space

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Step 2

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• Your rights and obligations when the lease is running

• Your landlord's rights and obligations

• Your rights and obligations when the lease expires

• What your landlord is throwing in for free

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Lease Terms That Give You Options

Research the MarketOnce you know what to look for, the

next step in the commercial lease

negotiation process is to find out

what is generally normal in your

market.

While the type of research you do can vary, here are some of the common

commercial lease negotiation factors to try to learn about:

• Rental rates for similarly sized spaces in comparable buildings

• Rent increase norms

• Lease types (gross, triple net, modified gross)

• Typical lease and option terms

• Typical landlord concessions (free rent, tenant improvement allowances)

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Step 3

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Decide What You WantOnce you know what is normal in a commercial lease negotiation, you can start

to formulate a plan and decide what you would like to ask for. For instance, you

might know that 5,000 square foot class A office spaces usually rent out on five-

year terms at $32 to $35 per square foot

gross with five months of free rent and $20

per square foot in TI allowances. If you are

looking for a ten-year lease, which is typically

more landlord friendly, you might ask for $31

rent, 6 free months and $30 in allowances.

As you decide what you want to ask for, remember one of the cardinal rules of

commercial lease negotiation. To get what you want, you have to ask for a little

more. So if you want to end up with the above lease term, you might go in

asking for $29 rent, 9 free months and $35 in allowances.

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Step 4

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Go Beyond RentLandlords with a long time horizon typically look at the total economic picture of

the lease. Those who are closer to selling the property might be more focused

on simply maximizing the rental rate. If you can go into

your commercial lease negotiation knowing what your

landlord needs, you can better tailor your offer to give

them what they need and give you what you want.

For instance, a landlord that is focused on

maximizing their rent rate might be willing to give

you a shorter term lease or more generous

concessions up front in exchange for an extra

dollar or two of rental income.

Even if you don't know what your landlord specifically needs, simply negotiating

the entire picture of your lease can save you money. Try to focus on the total

cost of the lease instead of on each of its pieces separately. Doing this will let

you find savings.

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Step 5

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Get Professional HelpFinally, when you enter a commercial lease negotiation, it's

crucial to not go alone. A comprehensive team of professionals

can help you achieve a higher level of success. Space planners

or architects help you understand how each space's

idiosyncrasies will work out when you actually have to configure

and occupy it. Attorneys help you craft legally favorable deals.

Most importantly, tenant representatives bring market

knowledge and negotiating skill to help you craft the best

possible occupancy structure.

Your tenant representation specialist has only one party's interest in mind --

yours. Since they work for you, they are charged to aggressively respect your

interests in the negotiating process. They keep your confidences and push for

terms that meet your needs, instead of the landlords.

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Step 6

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5 Reasons You Need a Tenant Representative

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