Negotiating your lease terms is one of the most critical steps in managing real estate costs and setting your business up for success. Here are some key areas to focus on during negotiations:

Always research comparable rents in the area before negotiating. Use this data to request a competitive base rent that aligns with market rates. You can also ask for a rent abatement period (e.g., 1-3 months of free rent) at the beginning of the lease to help with initial operating expenses.

CAM charges can fluctuate yearly, making them difficult to predict. Negotiate a cap on annual CAM increases to protect against excessive hikes. Also, ask for the right to audit CAM charges to ensure accuracy.

It’s common for landlords to include rent increases over time. Negotiate a fixed percentage increase instead of one tied to external factors like inflation or market rates, which can be more unpredictable. This ensures a more stable financial forecast.

If your business needs to modify the space, negotiate for a higher tenant improvement allowance to offset renovation costs. You may also negotiate who owns the improvements at the end of the lease term.

Negotiate renewal terms upfront to lock in predictable rent increases. Ensure the renewal process is clear, with a reasonable timeline and escalation limits, so you’re not surprised by a sharp rent increase when renewing.

If competition is a concern, ask for an exclusive use clause. This prevents the landlord from leasing space to a competitor within the same property or shopping center. It helps protect your business’s customer base.

If your business relies on nearby anchor tenants (large retailers that attract foot traffic), negotiate for a co-tenancy clause. This allows you to reduce rent or exit the lease if key tenants vacate, reducing the risk of your business being affected by lower customer traffic.

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