When you’re negotiating your next office lease, look for these 5 potential tricks to guarantee your next lease is a treat. Remember, the lease is written by landlords and for landlords. After all, they are in the business of making a profit and tenants are their sources for such. Their priority is themselves. It’s important that you equip yourself with the right tools, knowledge, and tenant representation to avoid these potential tricks.
Here are just a few key issues your representation can help you address before you sign the lease.
1. Get A Burn Down
As the saying goes, “Cash is King,” and if it’s locked up as a security deposit it isn’t getting your business anything. Time to negotiate a burn down. As you pay your rent payments over time, that security deposit your landlords got a hold on will decrease. It’s simple, the more times you pay rent and on time, the more comfortable your landlord should be with your tenancy. Why should your security deposit stay the same?
2. Direct Operating
Your rent will increase every year. It’s a reality. The question is by how much and how do you minimize those increases. Landlords will often try to up your annual rent by a fixed percentage increase (between 2-3%) and this can add up to large amounts over time. By negotiating Direct operating expenses this ensures that you never pay more than your fair share (and closer to 1.25% as an estimate) And guess what? Size DOES matter. The larger you are as a tenant, the more leverage you have in negotiations.
3. Get the Base Right
Make sure you’ve got the base year right. It’s crucial to establish the correct base year for your real estate taxes and operating expenses. Each year you’re off by could result in thousands of dollars in unnecessary payments. Get your base right and pay what you really owe.
When your landlord charges you $3-$3.50 per/sf on electricity they are making money. Try and negotiate submetered electricity for your space at as close to 100% as you can. Some of those landlords will try pushing for upwards of 110% charge, another profit center. Again, the larger you are the more likely you can push for that submeter. So, get that deal down and pay closer to what you actually owe.
5. The right to sublease
Negotiating a lease 101, you’ve got to have the right to sublease your space. Some landlords don’t even put that in their lease agreements and it’s a trick every tenant must know.
Here’s the deal: if you don’t have the right to sublease your space, how can you respond to a change in your business’ real estate needs.
Another thing to watch out for is if you can’t hire your own advisor to sublease your space. If you can’t do that you’re dependent on the landlord’s agent to show your space. And if there are vacancies in the building why would they be motivated to show the space of a paying tenant when they need to fill their own vacant space
The right to sublease gives your business optionality. Make sure you have it in your lease!