Here are some suggested steps to take when preparing a counter offer for a commercial lease.
- Try to counter offer more than one space at a time. This might require more work for you, but it ensures that you have options and might give you an upper hand in negotiations if the landlord knows you are considering multiple spaces.
- Measure the space yourself. If the listed square footage is not accurate, you can potentially lower the cost in the counter offer by using the actual size.
- Reduce the length of the lease term to as short as possible. Unless you are being offered a really good deal on long term rent rates, a shorter lease is better in case you need a larger space or your company starts to struggle at some point, because breaking a lease is expensive.
- Try to cap the year-to-year rent increases that are included in most commercial real estate leases, because they might not be accurate since they are based on possible vacancies or projected increased operating costs.
- Ask for a clause prohibiting spaces in the same building from being leased to businesses that compete with yours.
- Try to include wording that lets you sublet the space just in case you have to move out before your term is over. This could be helpful in the event that your landlord insists on a long-term lease.
- Try to avoid a personal guarantee. Ideally, you want to get your business name as the only one on the lease, but recognize that many landlords will insist on a personal guarantee, so you might have to concede this point.
Keep these suggestions in mind as you think about what you want to include in your counter offer!