Negotiating The Best Lease

Posted by | May 27, 2011 | Graham Lock's Articles | No Comments

Negotiating The Best Lease

Location

Ok, so we have finally found the ideal location, or decided to renew your existing lease, and now, comes for many of us the scary part of talking $$$ and commitment. In this current market, it is even more important to do everything within our powers of persuasion to negotiate the best deal possible, after all, if we do this wrong, we could be throwing more than just $$$ down the drain. This new lease is going to help bring you another step closer to achieving your dream, so let’s get it right.

Please note the information in this article is generalised, and I would be very happy to personally assist you if needed, click here.

Your Needs

You have by now already decided that this location meets your needs for exposure to a suitable amount of pedestrian and vehicle traffic; remember if it is buried in the back blocks, you will be spending large amounts of money on advertising and marketing. What may initially seem like a real bargain, can all of sudden become an expensive mistake, as nobody can easily locate you. It is also at this stage that you need to take into consideration what costs you are going to incur in your fit out and how long it will take before you will be up and running. Assistance with Fit out costs, signage and initial rent free periods can all be negotiated at this point with your landlord. Don’t forget while you are very excited, they are just as excited at getting a secure tenant, so do not miss this very important step, as it can save you a large amount of money and give you the breathing space to get organised. It is relatively easy at these early stages for a landlord to include these needs, as in most cases what you are requesting will be improving their building and assisting them in getting a secure tenant, which adds value to their location.

So Make Sure You Ask

Possibilities

There are many possibilities and different scenarios in leases, with the most common being a base rent, plus rates and taxes. Never assume that this is the only option you have, and again I would be happy to meet with you personally to assist if needed. Recently we successfully negotiated a 50% base rent reduction in a large shopping centre. The client had been struggling recently, but did not want to vacate, and the landlord also didn’t want an empty store. We were able to bring these 2 parties together and work out the reduced base rent, and then a percentage of turnover over the tenant’s breakeven point. The end result is the client has the breathing space to start working on their marketing ideas to improve turnover, and the landlord could possibly end up with more than wanted initially if the tenant’s new ideas work. A classic Win Win situation.

So Do Remember You Have Options

Research

Regardless of how long you may have been in this location and even if you have only just discovered it, do some research?  Contact local agents and find out what comparable rentals are per square. The more comparisons you can find, and do take into consideration visibility, exposure and useable floor space, the better armed you to make sure you are paying fair market rentals. Many commercial properties have dropped in value by up to 35% over the last 12-18mths, and this means there are some very good offers out there at the moment.

Offer

It is very important at this point to also understand that your potential landlord in most cases will have their own mortgage on these premises. As such their bankers will be expecting what they consider a suitable return to cover the borrowings that may be applicable, and it is here that it can become tricky. Try to find out what their needs are, and then look at ways that are affordable and cost effective to you. If you can make this happen, you are off to a great start, as a supportive landlord, who is not being driven crazy by their bankers is an ideal arms length partner in your future growth.

Term of Lease

Term of the lease is again something to negotiate, and whilst in these exciting early stages of negotiation you may want the longest term possible, it is much wiser to negotiate a shorter term with a couple of options to extend.  Again this is an area with many variables, provided you negotiate this from a sound business base and not an excited emotional state, you can both protect your interest and also offer the landlord some security.

Thank you again for reading this article I do hope it assists and I look forward to hopefully assisting you personally in the future. Email Graham

Warm Regards

Graham Lock mng dir
The Gold Coasts Retail Consulting Mentor

www.grahamlock.com.au

Professional and Personal Business Mentoring and Coaching
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