At one point or another, every business is forced to make a decision between remaining in their current space or starting a search for a new one. Choosing to stay or go is a big decision on its own, and an inevitable part of both is the lease negotiation process. Keep these 5 tips in mind to ensure you have the upper hand when the time comes for that back and forth dialogue.
Prioritize wants and needs.
Every business is unique, and the perfect space will need to reflect that. To one business, an extremely professional atmosphere is a must in order to host their type of clientele, while, for another, a space that drives collaboration amongst internal teams is more important than the aesthetics. That is just one broad example of two differing needs, and the list goes on. Beyond basic needs, it is also important to ask yourself what is essential for your business versus what is a nice feature to have. For example, while an in-office gym is often a great perk, is it a must-have for your corporate culture and a deal breaker for a space without one? Once you have thought through and articulated your wants versus needs, it is important to clearly rank each list in the order of importance to ensure you are focused on the most vital spatial elements for your business.
Don’t procrastinate (due diligence).
When you are in the position to walk away from a lease as an existing or potential tenant, you will always have the upper hand. Landlords will do quite a lot to avoid vacancies and starting early gives you enough time to negotiate with that specific leverage in your back pocket. During lease renewal negotiations many landlords will offer tenant improvement allowances, amongst other things, just to convince you to stay. We recommend starting looking for a new space at least a year prior to the expiration date of your current lease. This assures you have enough time to do your due diligence on everything from market analysis to your tenant-only representation.
Keep the big picture in mind (cost-wise).
Just as your business is unique to similar businesses in the same industry, every landlord’s operation is no different. Learn what each landlord prioritizes and use that as leverage during the negotiation process. For example, if your landlord is focused on long lease terms to avoid vacancy costs, a lower rent may be offered to try and lock you in for a longer amount of time. Keeping their wants in mind will allow you to capitalize on perks and cost savings that are often overlooked but extremely valuable. This concept can sometimes be tricky as the cost may seem higher at first glance, but when an overall cost analysis is performed, the lease is cheaper in the long run.
Remain hands on.
Lease negotiations foster a lot of back and forth paperwork. Some landlords will try and take advantage of the fact that you are busy running a business and may allow you to overlook changes in terms as the back and forth ensues. Stay hands on and very carefully analyze every single line of paperwork to ensure you fully understand to what you are agreeing.
Seek and listen to advice.
As stated above, you are busy running a business and not being a commercial real estate agent. Don’t feel pressured to go at it alone, as that is too often how big fiscal mistakes are made. Tenant-only advisors do not make their money based upon which space you choose, so their sole goal is to guide you through the commercial process. Once you have built a great team, it is essential to listen to their (sometimes unique) advice on everything from different buildings to market suggestions. Trusting your team to have your best interest at heart will allow you to make informed and strategic decisions that many business owners miss when they go at it alone.
As tenant-only advisors are a free resource, be sure to seek an established and experienced team to guide you through this extensive process. If you would like to talk about your options and future plans, please feel free to reach out to Coughlin Advisors today.