13 Tips for Negotiating Commercial Real Estate for Lease in Columbus, Ohio [2023]
If you’re looking to lease commercial space, it’s helpful to have reasons to negotiate. Negotiating a commercial lease is the most important aspect of renting commercial real estate for lease.
There is no “standard” commercial lease agreement. A commercial lease can be customized by both parties. Landlords typically provide their own leases to prospective tenants of their commercial real estate for lease. However, their lease is only essentially a proposal. There is usually much room to negotiate.
It’s important that you carefully review the commercial lease agreement before signing. Fully understand all terms, costs, clauses, and responsibilities of the tenant and landlord regarding the commercial real estate for lease. Since a lease agreement is legally binding, you should have a commercial real estate lawyer review the document first. An attorney specializing in commercial real estate law can help you understand the terms and make sure your interests and rights are protected.
What is a commercial real estate lease agreement?
A commercial real estate lease agreement is a legally binding document between a lessor (landlord) and lessee (tenant) for the use of a commercial rental property. The lease agreement details all terms and conditions, such as costs, duration, the option to renew, responsibilities, and more. A commercial lease agreement is usually open for negotiation to ensure both parties’ needs are met.
Related Reading: How to Find & Lease Commercial Space for Rent
Should I negotiate a commercial lease?
Yes! You should always negotiate a commercial lease in a way that benefits your business. The future is unknown, so make sure the lease provides you with flexibility, especially for a long-term lease.
Negotiating a commercial lease can be daunting, but if you allow ample time to negotiate the lease, you’ll increase your chances for a more favorable outcome. You probably won’t get everything you want out of the lease, but you can get everything you need. Remember to stay open-minded and realistic.
What is negotiable in a commercial lease?
A prospective tenant can negotiate almost all commercial lease terms. There is much more flexibility when negotiating a commercial lease than a residential lease. Below are some important lease terms to consider when renting commercial real estate for lease:
- Rent amount
- Automatic rent increases
- Fees, taxes, and operating costs
- Security deposit
- Commercial lease terms (move-in date, when your initial rent payment is due, how soon you need insurance)
- Property usage (how you can and can’t utilize the commercial real estate for lease)
- Exclusivity (ensuring that the landlord can’t rent commercial space for lease to a competitor on the same premises)
- Which party is responsible for maintenance issues
- Allowable property alterations and improvements
- Rent deductions for improvements made by tenant
- Parking spaces for you, your employees, and customers
- Lease renewal options
- Subletting options
- How to handle disputes
- Termination of lease
13 Tips for Negotiating a Commercial Lease
Whether you are renting your first commercial real estate for lease or have an established business and are looking to expand, your commercial space lease will be one of the most consequential factors. A poor commercial lease agreement can drain you financially and mentally down the road. Below are 13 tips for negotiating a favorable commercial lease.
- Find out if the rent is negotiable.
- Specify your strengths as a tenant.
- Be direct and polite when negotiating.
- Inquire about move-in specials.
- Know the property’s value
- Analyze comparable rent rates of local commercial real estate for lease.
- Understand your lease options.
- Ask for your ideal lease length.
- Consider lease renewal options.
- Look for hidden expenses with regard to the commercial real estate for lease.
- Request favorable lease clauses.
- Closely review the termination clause.
- Don’t sign the commercial lease hastily.
Is the rent negotiable?
Don’t be afraid to ask the landlord if the rent price is open for discussion.
What are your strengths as a tenant?
Let the landlord know why you would be an asset to their property. Show that you are reliable, responsible, stable, considerate, and easy to get along with. Make these attributes apparent from the initial point of contact, throughout your communications.
WAre you being direct and polite when negotiating?
Don’t beat around the bush. When negotiating commercial real estate for lease, use direct language but stay calm and professional. But also remain open and willing to compromise. Within one business day, follow up with a concise email to thank them for meeting with you, and reiterate your requests.
Are there move-in specials?
Even if there are no specials advertised, the landlord might be inclined to make you an offer. Ask if you can get a discount by paying for two or three months of rent in advance.
What is the property’s value?
If the asking rate for the commercial space to lease is higher than its worth, you can use it as leverage.
- Inspect the condition of the commercial real estate for lease — both inside and outside.
- Look at the property’s tenants and neighbors to ensure they’re compatible with your company. Don’t be afraid to speak with other tenants and neighbors that you see out and about.
- Determine if there are any competitors nearby that may hinder your business.
- Learn about the building’s foot traffic. Find out what hours other businesses keep. See how many parking spaces other tenants use (including their clients).
- Research the landlord’s reputation and look for red flags. Search for their name and property online and ask any tenants you come across for their opinions on the landlord.
Do you know the comparable rent rates of local commercial real estate for lease?
Look for similar commercial properties for lease in the area and see the amount they charge per square foot. Comparing market rates can help you negotiate the rate of your commercial real estate for lease.
What are your lease options?
Research lease options to determine which is best for you when renting commercial real estate for lease. There are five types of commercial real estate leases:
- Gross Lease (also known as Full-Service Lease). With a Gross Lease, the tenant is responsible for the base rent and all incidentals. Incidentals can include property tax, utilities, insurance, as well as maintenance, repairs, and common area expenses.
- Net Lease (including Single Net Lease/“N” Lease, Double Net Lease/“NNN” Lease, and Triple Net Lease/“NN” Lease). With a single-net lease, the tenant is typically responsible for the base rent in addition to one of the following expenses: property taxes, property insurance, or utilities. The landlord would pay for all other expenses. With a double-net lease, the tenant is typically responsible for the base rent in addition to property taxes and property insurance. With a triple-net lease, the tenant is typically responsible for the base rent, in addition to property taxes, property insurance, and utilities, as well as other maintenance and operation expenses.
- Modified Gross Lease. A modified gross lease is similar to a gross lease but you and the landlord share some of the incidental expenses.
- Absolute NNN Lease. With an absolute NNN lease, or a bondable lease, the tenant is responsible for the base rent and all expenses of that property including property taxes, property insurance, utilities, and building maintenance and repairs.
- Percentage Lease. In a percentage lease, you pay the base rent and a percentage of your gross sales over a specific minimum timeframe.
Keep in mind that landlords may add stipulations for you to cover other expenses, so closely review your payment responsibilities.
What is your ideal lease length?
Commercial real estate lease terms are typically for three to five years but you may find it beneficial to stipulate a shorter or longer lease term. A shorter lease term, such as one to two years, is ideal for newer or smaller businesses. Larger or more established commercial businesses typically want the security of a longer lease. With a longer lease, you may be able to negotiate a better price per square foot of the commercial real estate for lease.
Are lease renewal options included?
It’s ideal for a tenant to have the option to renew the commercial property lease. Stipulating a renewal option will allow you to decide whether you want to stay or vacate the commercial real estate for lease at the end of your term.
Are there any hidden expenses with regard to the commercial real estate for lease?
There are typically more fees than just your monthly rent amount. Understand any and all taxes, fees, maintenance costs, upkeep fees, and any other expenses that may be involved. Negotiate caps to these expenses or for a slightly higher rent amount in exchange for the landlord covering these expenses. Find out if each tenant has a separate utility meter or if utility fees are divided across tenants. Also, ensure that any future price increases in the base rent and incidentals are detailed in the commercial lease.
Are favorable lease clauses stipulated?
Ask for any modifications to the commercial lease that will benefit your business and you. For example, in a rent clause, you may want to negotiate the terms of automatic rent increases or deductions for improvements you may make to the property. In a parties clause, ensure that business name is on the lease, instead of your personal name. Make sure that the type of business you conduct and any signs that you plan to use are in line with the landlord’s requirements; if they’re not, stipulate it in a use and exclusives clause. A competitor clause can restrict the landlord from renting commercial space for lease in the same property to a business similar to yours; it can also require that the landlord gets your approval to rent commercial space in the same property to a competitor.
What is detailed in the termination clause?
Carefully review the circumstances in which either party may terminate the commercial lease. Find out if there is a lease termination penalty. Understand how you can break the lease if your sales decrease or you need to expand to a larger commercial space. You may be required to pay all or part of the remaining rent but you can negotiate more favorable terms. Determine whether you can sublease the commercial real estate for lease. In a subletting clause, you can negotiate your right to sublease the property should your business unexpectedly relocate or close; subleasing a portion of the commercial space can help cover rent costs.
Do you fully understand the commercial lease before signing?
When executing an agreement for commercial real estate for lease, don’t feel pressured into quickly signing. Take your time to review and understand every aspect and responsibility of the tenant and landlord.
Understand the Legal Requirements Specific to Renting Commercial Real Estate for Lease in Columbus, Ohio
Before renting commercial real estate for lease in Columbus, Ohio, understand local commercial leasing laws.
- Educate yourself on the leasing laws in Ohio. Read the Ohio Revised Code Chapter 1310 to better understand your rights and requirements when renting commercial real estate for lease.
- Commercial leases in Ohio must be notarized to be legally binding in a court of law. Any revisions or addendums to the commercial lease also need to be notarized.
- In addition to researching commercial real estate leasing laws in Ohio, learn the laws pertaining to your city. For example, did you know that in Columbus, Ohio, all rental payments are to be deposited in an escrow account with the municipal court when a landlord fails to make necessary requested repairs?
Looking to Find Commercial Real Estate for Lease in Columbus, Ohio (and Beyond)?
If you’re in the market to rent commercial real estate, The Robert Weiler Company has you covered.
With 85 years of experience, we’ve helped many tenants find commercial properties for lease that check all requirements. Our commercial leasing agents have advanced tools at their fingertips and a plethora of resources. From retail space for lease and office space, to warehouse leases and other commercial for lease, we can find you the best-suited property at the right price. Call us at 614-221-4286 to learn how we can help you find commercial real estate for lease in Columbus, Ohio, or throughout Central Ohio.
