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Negotiating Your Lease Like A Pro

Leases can be subject to change from year to year based on your contract terms. As your business approaches its lease renewal, entering into negotiations can be beneficial for both your business and your landlord. The topics of negotiation will vary widely, depending on your business’s needs, your lease terms and the fluctuating real estate market, but one of the best ways to successfully negotiate a lease renewal is to be well researched and prepared. As your business moves forward into the negotiating phase, consider the following tips:

Start the Conversation Today
It is wise to begin lease renewal negotiations 9 to 12 months before the lease expires. Beginning negotiations early has numerous benefits. Before consulting with your landlord, consider your foreseeable business needs. Will you need more or less space? Will you require any additions or construction to your office space over the next few years? Will your business thrive in its current location? The sooner these questions are considered and addressed, the more stability your company will have.

Know What the Property is Worth
Before negotiating, you need to know what similar properties are renting for nearby. Talk to your neighbors, read the classified ads, and find out the current state of your local rental market. Just because a rate increase is within legal limits doesn’t mean it’s within reason for the property.

Due to the dynamic nature of the real estate market, monitoring the market’s ups and downs could be to your benefit, allowing you to better understand your position and that of your landlord.

Point Out Your Qualities as a Tenant
It’s getting harder for landlords to fill properties with renters who pay on time, don’t bounce checks, obey the rules, and keep the property in good working order. If you’re a responsible renter who takes care of the place and reliably sends in the rent check, you’re in a good position to negotiate.

Offer to Extend the Lease
Perhaps if your landlord knew he wouldn’t have to bother with fixing up the place for showings, advertising the property, and interviewing a long list of potential tenants for a while, he or she might be willing to settle for less money. Offer to sign the lease for 18-24 months instead of 6-12.

Think About Paying Early or in Advance
Small businesses and family property owners are often swayed by upfront money. Offer to pay three months’ rent in advance (if you can) or consider moving your monthly due date to the first instead of the fifth. Getting money in advance is often an impressive incentive. 

Agree to an Increase in Exchange for Something
If it looks like your landlord simply isn’t going to budge on the increase, try for some non-monetary perks that pay off in other ways. Perhaps you’d be willing to stomach the price jump more easily if your property manager fixed the ceiling fan, painted the walls, or installed a garbage disposal.

Understand How the Office Space Benefits Your Company
Depending on your business and its locational or technological needs, a move may be a serious endeavor. If you are in a specialized field that relies heavily on certain technological, locational or security requirements, moving may be significantly more difficult. Knowing how easy, or difficult, finding a new office space in your region may be will help you prepare better for future negotiations. Although starting early is a good idea, do not rush to sign a renewal without understanding your options. Talk to your landlord. What are their future plans for the building? Will their vision align with your business’s vision? Landlords are often willing to consider your needs when approached in advance. By taking time to thoroughly weigh your situation and your bargaining abilities, you will be able to better negotiate your lease, while also gaining a better understanding of your landlord’s offerings.

Talk to a market professional like Chris Falk today for more tips and expert opinions on how to effectively negotiate a lease.

About the Author

Chris Falk SIOR, CCIM

Chris Falk is a Certified Commercial Investment Member (CCIM)—one of the most comprehensive commercial real estate designations, held by an estimated 6% of commercial brokers nationally. As a commercial real estate broker, Chris has handled over 600 transactions exceeding $475MM. Born and raised in Utah, Chris understands the unique qualities of the region and the great capacity for business opportunities in Northern Utah, including Davis, Weber and Salt Lake Counties. Chris is the premier, go-to agent for businesses and developers interested in this dynamic area.