Commercial Leasing Mistakes

Mistakes made during Commercial Lease Transactions

Finding the right office space and then agreeing to a commercial lease transaction can be a complicated process and a real time drain on resources. Many tenants rush the process in an attempt to get things signed and sealed quickly, but in doing so, can often overlook important issues that lead to costly mistakes and problems throughout the lease. So what are the five mistakes commonly made by tenants during commercial lease negotiations?

1. Underestimating The Time

Many companies don't have a grasp of how long an office lease negotiation can take. Both parties (the landlord and the tenant) need to come to an agreement on issues relating to timing, cost, legal documentation and build-out. Rushing this process can result in companies having to stay in existing premises or being forced into negotiating an unfavorable lease from the tenant's perspective. It is important to start the lease negotiation process as early as possible to give you enough leverage to negotiate the best terms for your business.

2. Lack Of Tenant Representation

There is no benefit whatsoever for not being represented by a tenant rep broker. A broker understands the ins and outs of the market and has the skills and knowledge to negotiate a competitive deal that will save you both time and money.

3. Underestimating Tenant Leverage

Tenants tend to think that an office lease is one-sided and states only the landlord wishes. This is simply not the case. The first draft of the office lease is likely to contain all the landlord's wishes, but a having a tenant rep broker negotiate your side of the deal will help to "level the playing field' and ensure that your financial and operational needs as a tenant are incorporated as part of the lease negotiations.

4. Putting Costs Above All Else

Don't get too hung up on rent alone when negotiating an office lease. There are many other factors to take into account that determine whether a lease is favorable or not. A tenant that pays a lower rent may have a more attractive improvement allowance, but at the same time have less control over thequality and timing of the build out. Similarly, a tenant that pays higher rent may have more flexibility over lease length or have all maintenance costs included in that price. Commercial leases come in all shapes and sizes, and it's important to look at the overall terms and not just be focused on rent alone.

5. Not Preparing For Expansion Needs

Tenants who fail to consider their expansion needs risk outgrowing their premises before the end of their lease. This can restrict your business growth and can cause issues around being able to service your client base effectively. You are likely to be contractually bound to your lease for a number of years, and during this time your business is likely to grow. Make sure you consider business growth and find a property that is suitable for both your immediate and future requirements.

Top Tip: Make sure you are clear about your financial, operational and space requirements when choosing the right office space.

Use this Office Space Checklist to help you weigh up all the important factors relating to your business and the details of each property before signing an office lease.

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