Tenant Representation 
Navigating the complexities of an office lease can be daunting, particularly for businesses in pursuit of the ideal floorspace that caters to their operational needs and expansion plans. In our role as advocates for the tenant’s interest, we have guided numerous businesses through the intricacies of leasing, emphasizing the importance of understanding both pricing and crucial business terms before sealing the deal.
Here are the top 10 terms you should consider to secure a lease that aligns with your business objectives:
1. Lease Term and Renewal Options:
The duration and flexibility of your lease are critical for balancing business stability and adaptability. Consider negotiating for shorter lease terms or options for expansion within the same building to accommodate the evolving needs of your business. Additionally, renewal options are vital as they grant the security to extend your lease under pre-agreed conditions. Exploring subleases could also be advantageous; they often come with shorter terms, lower rents, and may include furnishings, providing a flexible and potentially cost-effective alternative without the need for extensive negotiations with large institutional landlords.
2. Rent and Rent Escalations:
Understand not only your starting rent but also how it may increase over time. Rent escalation clauses outline how and when rent will increase, whether through a fixed amount or percentage, Consumer Price Index (CPI) adjustments, or other mechanisms.
In our financial analysis, we blend quantitative data with market foresight. By evaluating the total cost of occupancy, we provide a clear picture of the financial responsibilities and benefits associated with the lease over its entire term.
Christopher O’Neill, Associate Vice President
3. Operating Expenses (Additional Rent) and CAM Charges:
Beyond rent, tenants often share in the building’s operating expenses and common area maintenance (CAM) charges. Clarify what expenses are included, how they’re calculated, and your proportionate share.
4. Tenant Improvement Allowances and Build-Outs:
If your space needs modifications, negotiate who will bear the costs. Tenant improvement allowances can offset these expenses but understand the terms, how this allowance will be paid or reimbursed, and how these improvements will be treated after they’re installed. It’s also important to understand the total cost of construction, by engaging a great partner.
5. Sublease Clauses:
The sublease clause is a key item defines your ability to sublet your space or transfer the lease to another business. These rights are crucial for maintaining flexibility in case your space needs change. It’s important to look into your rights around transfers, what information the landlord will require, whether they have any restrictions and the ability to decline a transfer, and the timing and costs to secure landlord approval.
6. Termination Rights:
Check the circumstances under which either party may terminate the lease. For example, can the landlord terminate your lease if you miss a rent payment, or is there a period for you to cure this default or others. If the building has the potential to be redeveloped, is there a notice period for the landlord to end the leases. In some cases, tenants can secure the right to terminate their lease early, which can provide needed flexibility but often with large penalties or pre-payments.
7. Expansion Rights:
This clause can be vital for growing businesses, giving you the first opportunity to lease adjacent or additional space before it’s offered to others.
8. Parking and Accessibility:
Ensure the lease agreement specifies parking availability and costs. Accessibility for employees and clients can significantly impact your business operations.
9. Signage and Branding:
Visibility can be key for your business. Negotiate the rights to exterior and interior signage to enhance your brand presence.
10. Repair and Maintenance Responsibilities:
Clearly define who is responsible for maintaining and repairing the leased space and the building’s systems. Misunderstandings about these responsibilities can lead to unexpected expenses.
Summary
Engaging a commercial real estate broker is essential for navigating the intricacies of negotiating these terms. A broker’s role goes beyond simple negotiation; they work in tandem with your legal team to ensure the agreed terms are reflected in the final lease document. Be mindful that landlords might present their standard lease agreements to prospective tenants.
Whether you’re considering a standard form or drafting a new one, having your lease reviewed by an experienced attorney before finalizing the agreement is imperative.
Feeling limited by your current office space? Whether you’re a startup or an established company, Floorspace is here to guide you to a workspace that enhances your growth trajectory.
Contact us for a fresh perspective in commercial real estate, and let’s discover a space that truly fits your business’s evolving needs.
