Whether a company is moving to a new location or opening its doors for the first time, the terms of a commercial lease can make the difference between a business flourishing or faltering. As businessmen and women themselves, landlords typically design leases to be as profitable as possible for their own bottom line. That makes it crucial that lessees pay close attention to any provisions that they may want to negotiate before signing a contract.
The length of the lease is one of the most important considerations when choosing a commercial location. While some business owners may prefer to be cautious and flexible, others may want to invest in a longer-term contract that provides security and stability.
Deciding between a long- or short-term lease
Landlords generally prefer longer leases that offer stable cash flow and allow them to recoup up-front costs related to accepting a new tenant. However, in certain circumstances, a shorter-term lease may be more beneficial to a business’s projected needs. Fledgling companies may not be ready to commit to a specific space, and quickly growing businesses may want to keep their relocation or expansion options open.
On the other hand, during lease negotiations landlords may be open to offering tenants certain advantageous terms if they are willing to sign a longer lease. In addition to a lower cost per square foot of space, a landlord may agree to make significant tenant improvements to the space before the business moves in. Whether a business owner prefers flexibility or solidity, it is important to know that the length of a lease term is frequently negotiable.
Establishing renewal options
Commercial leases should also include a provision for renewal terms, either automatically or through formal request. Established businesses may benefit from a lease that specifies longer and multiple renewal terms, while a less established company may prefer to negotiate for a short initial term followed by one or more options to renew.