How to Negotiate an Office Lease: 10 Tips

Whether you’re getting your new start-up off the ground or are an established homebuying company looking to relocate, you’ll probably need to lease office space. Once you’ve found your dream space, you might think the hard work is done. But before signing on the dotted line and moving in, it’s well worth negotiating your office lease to get the best deal possible.

We realized a long time back that “Real estate is likely one of your company’s biggest costs, so it’s important not to leave anything to chance.” If you’ve never negotiated an office lease before, it can be difficult to know where to start.

How To Negotiate An Office Lease

Also known as a commercial lease, an office lease is a legally binding contract between the landlord and the lessee, i.e., the business tenant.

Similar to a residential lease agreement, it stipulates the conditions under which the business tenant can use the space and the associated costs. It also contains several clauses and conditions, all of which have an impact on your business.

It’s well worth taking the time to negotiate a good deal. Overspending on rent can leave you struggling to invest in growing your business, while also leaving you vulnerable to unfavorable economic conditions.

10 Tips To Negotiate A Good Deal On An Office Lease

With the basics out of the way, let’s take a look at our top ten tips for negotiating a great deal on your office lease.

1. Be Prepared & Research

By doing your research, you’ll be able to go into negotiations with a better grasp of your position. There are several terms of the lease that you can negotiate to satisfy your business needs. Knowing these and figuring out what you want in advance is essential. Jon and I always take the advice of a real estate attorney when expanding our company’s office.

Here are the main terms you’ll find in a lease:

• Rent fee – The initial fee from the landlord isn’t set in stone, and you can often negotiate it down.
• Service charge – The service charge may include repairs or even upgrades. You can negotiate the details to ensure you’re not paying for things you don’t want or need.
• End-of-lease obligations – Be sure to understand what is expected of you at the end of the lease. You may be able to extend your lease if both you and your landlord agree to it.
• Subletting rights – The landlord needs to consent if you wish to sublet in the future.
• Repairs – If the property requires repairs, you can request that the landlord take care of them before you move in, or they may include a clause where you support the cost of repairs in return for a reduction in the lease rate.
• Break Clause – The ability to terminate the lease early without being penalized.

2. Think Long-Term

Landlords prefer long-term tenants. As long as the tenancy is financially viable to the landlord, they will be more willing to negotiate the terms of the lease overall.

For our office in Philadelphia, we signed a 10-year lease with a break clause on the fifth anniversary of the term start date at six months’ notice. That offered security to both the landlord and the tenant if they wished to exercise it.

3. Get Competitive

Even if you find your perfect space, it’s worth checking out other local options and speaking with other landlords. This essentially allows you to find out comparable rates and conditions, meaning you can better negotiate the space you really want. You’ll also have a stronger negotiating position, meaning the landlord may be more willing to negotiate.

4. Read & Read Again!

It’s advisable to engage an attorney. The attorney will read the lease agreement and prepare it to be airtight for their client, which is you in this case. Before signing, you must read the lease with your attorney and discuss any terms you find confusing.

5. Get It in Writing

Any negotiations or special requests must be incorporated in the lease before both parties sign. The agreement is binding.

6. Check the Termination Conditions & Break Clauses

Ensure to review the termination conditions and break clauses. These unforeseen scenarios should be discussed beforehand and incorporated in the lease to provide security to both parties. A break clause is well worth insisting on.

7. Investigate Landlord’s Legal Fees

Sometimes, landlords may try to include their legal fees in the service charge. This is not standard practice, and you have no obligation to pay them. In some cases, it can work in your favor to pay them to negotiate a better deal in better areas.

8. Request Favorable Terms & Clauses

There are many terms and clauses you can request that can benefit your business. Being able to sublease the space can be invaluable if you need to downscale, and the same is true for a break clause.

9. Understand the Exact Costs

There are several different types of office leases, and it’s important to understand the differences. A gross lease is all-inclusive, which includes rent, utilities, and taxes. Meanwhile, with a net lease, you’ll pay rent but will also have to pay additional costs, such as utilities. Be sure to understand exactly what you’re required to pay, especially in terms of maintenance.

10. Work With a Legal Representative

“Legal assistance is essential for office leases.” There are certain terms and clauses that we don’t understand. However, an attorney can guide you through this process to secure the best deal.

Summary

Now you know how to negotiate an office lease. Similar to selling a house, a lot goes into leasing an office space as well. When we initially rented an office space in Philadelphia, we didn’t realize that 10 years would go by, and it would be renewed for another 10 years.

But that’s the beauty of a great office lease.