Your 5-minute guide to negotiating a commercial lease

Negotiating a commercial lease agreement for your business can be challenging if you’ve never done it before. But with a sound strategy, some expert advice from your commercial property experts, and some negotiating power, you’ll be well placed to find a new home for your company. Not to mention securing a commercial lease agreement that meets your business goals!

Tip #1: Knowledge is power

First up, you’ll need to do your research in a few different areas for a new commercial property to lease. This task generally requires you to locate and inspect a handful of spaces, and then compare them against each other. When you understand the features, benefits and costs of each commercial property, you’ll be able to use this information to maximise your lease negotiation power.

It’s much like when you shop around for a new phone: you use the costs, features and benefits of one contract to get a better deal with another company who might price match. Even if there is one property in particular you really want to lease, be mindful that the more options you have, the more leverage you maintain.

When identifying the perfect space for a commercial lease, always do your homework. Factors that matter may include:

• Location
• Commercial rental prices
• Extra charges like outgoings
• Amenities
• Public transportation
• Parking
• Space configuration
• Condition of the space
• Tenant improvement dollars
• Utilities
• Technology
• Common areas
• The building’s overall condition

Tip #2: Create a short list

Once you have a list of possibilities for renting commercial property, you’ll need to analyse each commercial property by identifying its total rental value. The list of factors to consider above will help with this process. Landlords approach leasing from this angle, and tenants should as well. Once you have an idea of the actual cost of the commercial lease, it’s time for lease negotiation.

Tip #3: Become a master of lease negotiation

Negotiation is an art form, and it requires a considered mixture of practice, due diligence, knowledge and compromise. Yes, the best commercial real estate negotiations are generally win-win, so keep in mind that you might need to compromise in order to land the deal.

This isn’t to say you shouldn’t push back on the things that really matter, but you need to know what lines you can’t cross – or you might risk losing the deal. It will help if you have an understanding of recent commercial tenancy agreements within the area, or your potential landlord’s recent commercial property leasing history.

Luckily, you won’t have to be a super sleuth. This is where engaging with a reputable commercial real estate broker or agent will help, as they can usually send you a list of recent deals in or around a building that you’re interested in. The more you know about recent, similar deals to yours, the better equipped you are to achieve a favorable deal.

Remember: information is the key to rock solid negotiation tactics.

Tip #4: Review your commercial lease

This might sound obvious, but we have to stress that once you’ve found the right commercial property to lease it’s imperative you actually read the lease agreement, from cover to cover. You’ll need to understand:

• Rent review clauses, which define when your rent will go up and by how much;
• Make-good clauses, which specify that tenants must return the property to its original condition;
• The cost of security and whether a bank-guarantee is required, and;
• Fit-outs, and what changes to the place you’re entitled to make – and not to make.

Tip #5: Don’t DIY your commercial lease agreement – hire a lawyer

It pays to have a lawyer review your lease on your behalf. A solicitor on your side will act in your best interests to ensure there are no hidden elements within the clauses that might affect your commercial lease agreement.

New to commercial property leases? Need informed and expert advice on what your company needs? Talk to the experts at HKC Property Consultants. We achieve results for commercial tenants. Get in touch today.