Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

— Nathan K Smith (@AustinTenantAdv) June 28, 2019

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EnHelix thanks for following me on Twitter! https://t.co/NgzXOXeYXb

— Nathan K Smith (@AustinTenantAdv) June 27, 2019

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— Nathan K Smith (@AustinTenantAdv) June 24, 2019

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Reader Favorites thanks for following me on Twitter! https://t.co/6rovKoSJOo

— Nathan K Smith (@AustinTenantAdv) June 21, 2019

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— Nathan K Smith (@AustinTenantAdv) June 20, 2019

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Proposals to Lease Commercial Space – Examples Offers

After touring commercial spaces for lease you eventually narrow it down to your top 2 or 3 options. At this point you like them all equally based on the look and feel of the building. Now you must determine if the economics make sense, and ensure that the buildings and spaces can accommodate your current and future needs.

The offer you make to lease commercial property will depend on the type of space and the situation. If you like all your final options equally then sometimes it’s best to draft a request for proposal (RFP) and let the landlords respond accordingly. 

Example Request For Proposal to Lease Office Space

Here is an example proposal request to lease commercial office space.

We will have more example offers to lease commercial space posted here soon.

If you need help with your commercial space lease Austin Tenant Advisors are here to help!

 

 

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

— Nathan K Smith (@AustinTenantAdv) June 16, 2019

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Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

— Nathan K Smith (@AustinTenantAdv) June 13, 2019

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— Nathan K Smith (@AustinTenantAdv) June 10, 2019

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— Nathan K Smith (@AustinTenantAdv) June 10, 2019

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— Nathan K Smith (@AustinTenantAdv) June 9, 2019

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Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

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How Commercial Lease Option Clauses Work

There are many things to consider when negotiating a commercial lease such as rental rate, operating expense caps, rent commencement dates, etc. There are also several options that a company must consider that if not negotiated properly can have a significant impact on the current and future business. Some tenants don’t know about them or don’t know how to negotiate them, however when you understand them you will realize how important they are. If you would like help negotiating a lease consider hiring a commercial real estate company like Austin Tenant Advisors. In the meantime you can learn about them below.

What are Commercial Lease Options?

An option in a commercial lease gives the tenant the control, the choice, or the right to do something. Landlords don’t have to give options to you. You Must negotiate them if you know how. Some of the most common commercial lease options are the option to renew, expand, or sublease. There are typically requirements around the options (e.g. time frame to exercise) that the tenant has to meet however at the end of the day they have the ability to accept or reject the option during a specified time period. Without these in many cases it can be a huge inconvenience for a company down the road.

Commercial Lease Renewal Option

Most commercial leases are 3-5 years. At the end of that lease term the landlord can lease to another tenant or will allow you to renew the lease. However, if you negotiated a lease renewal option during the initial lease negotiations you have the control. You typically have to make your decision during a specified time period (e.g. no later than 180 days before the lease expires) however you have the option to renew the lease or move out.

Commercial lease renewal rates are typically negotiated at a predetermined fixed price or at fair market price which is determined by pre-negotiated criteria.

Benefits of Having an Option to Renew the Lease

• You will know what rent to expect years in advance
• Gives you peace of mind you have control of the space for years to come
• You have the option of exercising your renewal option or renegotiate the whole deal if market conditions change

Commercial Lease Sublease Option

Unexpected things happen. Your company could merge with another or get acquired. You may have to downsize or maybe growing and your current landlord doesn’t have anymore space, which means you would have to rent commercial space in another building.

If anyone of the above happened you would have to have the ability to sublease or assign your lease. Without this you would be stuck with the space. Having a sublease option gives you the ability to rent the space to another company. Of course the landlord has to give final approval however having this option can sometimes get you out of a bind.

Commercial Lease Option to Expand

For growing companies the ability to lease more space later on is important. Landlords like long term tenants are and likely to agree to an expansion option in the event you need more space, as long as they have it. Some expansion option may have an expiration date associated with it. Meaning you have until XX date to expand into a certain space and the deal terms would be the same as your original lease.

Expansion option might be in the form of a right of first refusal or a right of first offer.  

Right of First Refusal

If you have negotiated this then there is probably some vacant space adjacent to you or somewhere in the building that you would like to expand into if needed. Having a right of first refusal requires that the landlord give you first choice on a pre-negotiated deal on pre-determined space. So let’s say there is a space next to you and another company negotiates a deal with the landlord to rent it. The landlord has to take that deal that they would accept and offer it to you. You get to choose whether you want that deal or not.

Right of First Offer

If you have negotiated a right of first offer then anytime pre-determined space becomes available the landlord has to give you the first choice before offering it to someone else.

Commercial Lease Termination Options

Landlords don’t give these too often however they are good to have in the back pocket. In most cases if they agree to one they will require that you pay the unamortized tenant improvement costs and lease commissions. Additionally they may tack on a few months of rent as an early cancellation fee. There is also typically an expiration date tied to it. For example the lease may say that can’t termination until the 24th or 36th month of the 5 year lease.

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

— Nathan K Smith (@AustinTenantAdv) June 6, 2019

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Commercial Lease Negotiators Help Tenants Get Better Deals

If you are leasing commercial space and have never negotiated a lease or have not done so in 3-5 years you would be doing yourself a favor to get help. Landlords are paying commissions regardless if you have help or not so you might as well engage a commercial lease negotiator to ensure you get the lowest lease rate and best terms possible. 

A commercial lease negotiator will review your lease and negotiate on your behalf against the landlord the the business and economic terms of the contract. They are typically commercial real estate agents, not attorneys so they can’t provide legal advice or services, however they will collaborate with your attorney to ensure your current and future business needs are protected as it pertains to the lease.

They will support you throughout the entire lease negotiation process; from drafting & submitting request for proposals (RFP) or letters of intent (LOI) all the way through negotiating the basic deal terms and conditions to the final executed commercial lease contract.

They educate you so that you understand the business and economic terms of the lease and how that affects your company now and in the future.

They also ensure that there is a common understanding between the tenant and landlord.

Whether you are leasing office space, warehouse space, medical office space, or retail space professional commercial lease negotiators will have you covered.

Types of Commercial Lease Negotiation 

• Drafting request for proposals (RFP’s) 
• Drafting letters of intent (LOI’s)
• Lease agreements
• Lease assignments and subleases
• Lease amendments
• Lease renewals
• Lease terminations

If you are looking for a commercial lease negotiator in Austin Tx Austin Tenant Advisors has been around for over 14 years and has negotiated 100’s of commercial leases.

6 Tips For Negotiating the Best Commercial Lease

Contrary to popular belief commercial leases are negotiable. If you know what to ask for and how to ask it’s possible to negotiate concessions such as free rent, reduced base rate, expansion options, etc. But you have to try. If you don’t have the time, don’t know the market, or are just uncomfortable negotiating on your own then consider hiring a commercial real estate firm that specializes in representing tenants. A good commercial lease negotiator an ensure no mistakes are made and that you get the best terms and conditions. If you are adamant about doing this on your own we have written a bunch of articles such as this one that can help.

Below are a few tips to consider when negotiating a commercial lease.

Negotiate more than one location at the same time

To give yourself leverage it helps if you negotiate more than one option at the same time. If the landlord knows you have other options they are more likely to give you better concessions. This gives you the ability to walk away if they won’t work with you. Also, In a hot market you need to have multiple options in the event another company offers the landlord a better deal than you.

Get a lower base rate by offering to do a longer lease term

You need to understand your current and future needs before doing this. If you are unsure of your business growth stick to shorter term (3 years or less). However if your company is more established and / or the landlord can accommodate future growth you should be able to negotiate a lower base rate in return for a longer lease. This will also help get you more tenant improvement allowance also.

Protect yourself from operating expense increases

Operating expenses are the taxes, insurance, and maintenance (aka NNN) in commercial leases. Most leases will be quoted as some base rate + NNN. Operating expenses will typically increase or decrease every year depending on the market you are in. In hot markets some buildings end up having huge increases in taxes. To protect yourself you want to try to negotiate to have those capped to avoid facing steep increases. For example ask that the operating expenses be capped at no more than 5%. 

Find out what rates other tenants are paying

If you can find out what other tenants are paying in the building you are interested in as well as other comparable buildings close by. The more market knowledge you have the better equipped you are to negotiate.

Ask for a cure period

A cure period is the time you have in a lease to rectify a breach or default. Make sure you read the lease to see if there is one. If there is not you want to negotiate hard for this. With automatic banking this should not occur however If for whatever reason a tenant forgot to pay the rent they could be subject to legal action or fines without a cure period in the lease. Landlords are typically OK with this however if you don’t ask you won’t get it.

Make sure you have the ability to sublease and assign

If your company ever needs to downsize, be forced to move because the building can’t accommodate your expansion needs, or merges with another company you need to have the ability to sublease and/or assign the lease. Don’t get stuck with space you don’t need or use and make sure you are able to assign the lease to the new company entity in the event of a merger or acquisition. 

There are many more things you can negotiate however this can get you started. If you are trying to renegotiate a commercial lease that has already been executed that is possible as well.

Hayden Gatlin thanks for following me on Twitter! https://t.co/xBygaLz7Us

Hayden Gatlin thanks for following me on Twitter! https://t.co/xBygaLz7Us

— Nathan K Smith (@AustinTenantAdv) June 2, 2019

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