How does an entrepreneur negotiate a commercial lease?

How does an entrepreneur negotiate a commercial lease?

On Behalf of | Sep 7, 2021 | Real Estate |

Some businesses cannot operate without a brick-and-mortar location, and signing a lease becomes a typical step when choosing an appropriate commercial property. Monthly rent payments cut into profit margins, so commercial tenants in Hawaii might find it necessary to negotiate proper lease terms. Otherwise, even if the business proves profitable, the business owner could run into problems.

Primary steps when negotiating a lease

Location factors heavily into choosing the right commercial property, and would-be renters might need to look at the average lease costs in a particular area. Are the lease terms similar to other similar properties? If the monthly rent is higher or lower than the average, finding out why seems advisable.

The lease’s price might cover more than the rent. That is, the monthly fee may include rent, utilities, and maintenance. Sometimes, the landlord might pay the insurance. If the landlord handles the repairs and other responsibilities associated with the property, the tenant may be free to concentrate more on business matters.

If such “extras” are not in the lease, the would-be renter could negotiate to add them. The price would likely go up, but that figure may be negotiable. The landlord may not agree initially, but the landlord and potential tenant could continue to negotiate.

Basic points about negotiating

New business owners might lack the experience to handle commercial real estate negotiations, meaning they may not approach the process properly. Only dealing with one location and landlord could be an error. If things don’t work out, time ends up lost. Looking at and negotiating with more than one landlord could be wise.

Seeking deals may help. Does the landlord offer any free rent or discounts for long lease terms? Such “perks” could help the business. So might working with a professional capable of handling the negotiations. An experienced negotiator might not be prone to make mistakes.