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 Posté le: Lun Sep 30, 2013 3:47 pm Sujet du message: Ask the experts: What should I consider when negot |
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{Ask the experts: What should I consider when negotiating a commercial lease?}
Eugen Klein, Matt Walker and Matthew CarlsonTue May 7, 2013 12:01am PSTEugen Klein: Commercial realtor, principal, Klein GroupNegotiating a commercial lease requires preparation, knowledge and skill. Failure to gather the right information and plan ahead will result in a long lease commitment that may be costly.Understand your business: Developing an accurate business plan,[url=http://www.moncler-sale.org]moncler outlet[/url], whether you are a long established business or a startup, is essential. For long-time operators it will let you review what you have taken for granted or consider new alternatives. Are we operating efficiently? Do we require high-traffic areas with related tenants nearby? What type of space will be best? Will we need shipping access? How do our customers find us? Etc. Market information: Gathering accurate and applicable market knowledge is essential. You need to source completed lease transactions, which will reveal incentives, term lengths and allowances in order to assess what the costs of net rents are for tenants with comparable spaces. Many potential lease space options are not advertised, nor have a sign placed. Ensure you have sourced all the available options. The availability of alternatives gives more choice and better negotiating leverage.Space plan: With new technologies, space planning is becoming a way for tenants to reinvent business,[url=http://www.moncler-sale.org]moncler sale[/url],[url=http://www.moncler-sale.org]moncler on sale[/url], cut costs or enhance customer experience. With this in mind, reconsider how much space is needed,[url=http://www.moncler-sale.org]moncler outlet[/url], how to configure space or reconfigure it to anticipate future plans.Lease terms: The length of your lease will depend on anticipated growth or quality of location for your business. Lease rate escalations should be considered to offset an average rate expectation of the landlord. Percentage rents are used when landlords and tenants have a combined vested interest in each other’s success. Lease renewals, options to purchase,[url=http://www.moncler-sale.org]moncler down jackets[/url], use restrictions are other terms used to secure your interests long term. Ensure you have considered potential business risks wherever possible.Matt Walker: Principal, Avison YoungIt is important to consider five principles when negotiating a commercial lease.Pre-negotiation preparation: Partner with experts that may include architectural, interior design,[url=http://www.moncler-sale.org]moncler down jackets[/url], real estate brokerage, legal and tax professionals to ensure that you are equipped with all the information required to make informed decisions and negotiate with confidence.Age and stage of business: Consider the financial strength, operating history and rentable area required by your tenancy in the context of market conditions. Landlords will assess a prospective tenant’s track record when negotiating incentives such as free rent and allowances, and will typically propose more favourable terms to established organizations seeking larger premises.Environment: Assess the landlord’s need/motivation to obtain/retain tenancies. The vacancy and financing status of a property, tenant activity within the building and marketplace, and the landlord’s own tolerance for risk are all factors to consider when creating leverage.Timing: Determine the best time to start the due-diligence and negotiating process and the best time in the market cycle to enter into a transaction. Also consider degree of flexibility and preferred length of lease term.Strategy for negotiations: Evaluate how best to engage the landlord in the negotiating process. A variety of strategies should be considered,[url=http://www.moncler-sale.org]discount moncler jackets[/url], including request for proposal and request for information competitive bid processes, offer to lease and short-form letter of intent. Select a strategy that is relevant to the age and stage of your business and prevailing market conditions, and one that will ensure participation from multiple landlords to create a competitive environment.Access to expertise and information, an understanding of the relevance of your circumstances and a clear picture of the environment will enable you determine the optimal timing and strategy for lease negotiations.Matthew Carlson: Senior associate, ColliersYou’ve identified a commercial space that meets your business needs. The next step is to provide the landlord with a non-binding offer to lease, essentially a contract to enter into a lease agreement on certain business terms.Before you start negotiating,[url=http://www.moncler-sale.org]moncler on sale[/url], it’s important to engage a tenant representation broker who can educate you on the process, market pricing and deal terms. This broker will assist you in drafting the offer to lease, and will ensure that your interests are protected.Below are a few key items to consider in the offer:Term: Most landlords will insist on a five-year lease or longer. Ensure you negotiate a term that best suits your business and ask for an option to renew and the ability to sublet.Early access: Landlords will often ask that you pay rent upon taking occupancy. If you plan on renovating ask to pay rent after the renovations are complete.Rent and inducements: Most landlords will set aside a budget for tenants to complete renovations. Ask how much the landlord will provide within the asking rental rate.Landlord’s work: Ask the landlord to deliver the space in clean,[url=http://www.moncler-sale.org]moncler sale[/url],[url=http://www.moncler-sale.org]discount moncler jackets[/url], tidy condition and confirm the building systems be delivered in good working order.Subject conditions: Landlords may ask you to sign a binding offer. Ensure the offer is non-binding by adding subject conditions that allow you to complete your due diligence.After the offer has been negotiated, consult with your tenant broker and lawyer to review the lease document, and make any changes that could affect how you operate your business in the space.If your broker and lawyer support the business terms and lease language, you are now ready to complete the deal.Tags: law, Avison Young (Canada) Inc., Colliers International Hotels, real estate
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