The commercial real estate leasing process can be very detail-oriented. Here are a few things to be aware of when you enter lease negotiations, as suggested in the article “Commercial Real Estate: What You Need to Know Before Leasing”:
- Beware of the first draft. Know that the first copy of a lease that a landlord gives you will be full of terms that are much more favorable to them. The landlord does this hoping that you as a tenant will sign this first copy without putting up a fight. However, you need to enter negotiations knowing that the lease you will receive is not standardized—many of the clauses in it are up for negotiation, and you can potentially get a lease to a point where it is fair to both parties.
- Personal guarantees. You will most likely have to sign a personal guarantee when renting a space, which means that you are personally liable for rent in the event that your business cannot pay. A landlord will also probably want to check on your personal finances to make sure that you can follow through with this. Note that landlords usually only care about this until you have established your trustworthiness as a tenant, so you might be able to negotiate to end the personal guarantee after a few years.
- Commercial lease pricing. While your rental rate is going to be quoted on a per square foot basis, know the difference between usuable square footage—the office space you will actually use—versus the rentable square footage—the rate you will be charged for that also includes common spaces in the building.
Be ready to be a strong negotiator by doing your homework on commercial leases!