As we’ve worked with our clients, we encourage them to look for locations that will allow them the opportunity or option to grow their businesses in the future. When it comes to your location, your customers need to be able to find you, and you’ll want your location to provide them with a comfortable customer experience. Don’t overlook factors such as ease of accessibility, ample parking, and providing those who come with a safe environment. And speaking of things to keep in mind – here are some additional timely tips from our friends at The Lease Coach!
Thank you once again Dale and Jeff for providing these important considerations for our “Business Success” audience.
Negotiating Commercial Leases & Renewals For Dummies
Commercial Leasing Tips for Commercial Tenants
By: Jeff Grandfield – The Lease Coach
For many business-owners, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.
As explained in our new book, Negotiating Commercial Leases & Renewals For Dummies (co-written with my colleague, Dale Willerton), tenants may go through the leasing process only two or three times in their entire lifetime – yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for an entrepreneur as the amount of rent he pays will directly affect the business’ financial bottom line.
Whether you are leasing a new location for the first time or negotiating a lease renewal for your business, these are some money-saving tips for tenants:
Calculating Market Rents: Landlords and leasing agents will often justify their price per square foot as market rent (established on what other tenants are paying). Today, much space is leased by category – a daycare centre may pay less than a hair salon and a hair salon may pay less than a pharmacy. In most office buildings, rental rates are more consistent and market rents can be more easily established. Don’t be fooled. Most lease deals we negotiate for tenants end up coming in well below the so-called market rents.
Establish a Prevailing Rate of Rent: The prevailing rate/prevailing rent is established for a particular building based on recent lease agreements under similar circumstances. While the prevailing rent is not always justified, it will be a good indicator of what other tenants are willing to pay. Be aware of artificially high rental rates that were only achieved through generous free rent incentives and tenant allowances.
Check Your Gross Up: Office tenants, specifically, usually pay a grossed up rent. The R/U factor (which stands for Rentable versus Useable) is normally 8 to 12 percent. Therefore, if you have 3,000 square feet with a 10 percent gross up, you will actually pay rent of 3,300 square feet to compensate for common areas on your floor. It is important for you to find out and verify the gross percentage ahead of time to avoid any nasty surprises. It is the architect who designed the building – and not the landlord – who determines this figure.
For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.
Jeff Grandfield and Dale Willerton - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.
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