As a landlord representative while finding out about a prospect one of the main questions to ask is how long of a term are they willing to commit to. I am not sure why but it always strikes me odd when they inform me only 1 year a few 1 year renewal options. At this point I do have to let them know Owners and banks view this still as a one year lease.
There are various reasons for someone wanting a one year lease but the main reason is they don't have faith in their business. I understand running a business is a risk and that factors change all the time. I myself am self-employed and I have good months and not so good of months. But there are some major disadvantages for businesses requiring a one year lease.
1. No Incentives
Landlords will rarely provide any leasing incentives. One common incentive is free rent. Without any term do not expect to receive a month or more of free rent to get your business up and running to create some cash flow before that first month's rent is due.
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2. No Reduced Rent
Throughout my career I have found it very rare for Landlords to go off their asking rent for a one year term. There is no incentive for a Landlord to reduce their rent. With a one year lease the space is pretty much back on the market as soon as the lease is signed so the Landlord can fill the space once the year is up. So there is cost to that.
3. No Tenant Improvement Dollars
Many spaces in commercial real estate are not built out the exact way your business needs. Many landlords will provide an allowance that would be used to assist with any modifications you need to make the space more usable for your business. Unfortunately on a one year lease a landlord will not provide any dollars to assist you. This means the costs to improve the space comes at your cost.
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So as you can see the desire to sign a short term (1 - 2 year lease) may offer your company the flexibility if things do not succeed, but costs your company more on its leasehold. If you have faith in your business it is financially better for you to sign a 3 - 5 year lease. Why not let the landlord work with you to give you the best financial opportunity to succeed with receiving free rent, reduced rent and some money to assist with transforming the space to fit your exact needs?
Kristian Lee is a REALTOR specializing in Commercial Real Estate currently the co-chair of Mainstreet Organization of REALTORS (MORe) Commercial Committee and Vice President of Schulz Properties, LTD. Kristian has over a decade of experience working with local, regional and national companies in the retail and office sectors throughout Will County, DuPage County and various states. Currently Kristian also represents over 200,000 SF of commercial property in the Will County market. If your lease is currently up for expiration, looking to relocate, expand or opening another location Kristian can offer his expertise to be your advocate throughout the process to acquire the best deal available. Follow Kristian's blog at commercialmns.com or via social media at: twitter and facebook.
Have specific questions or seeking representation feel free to call Kristian at 815.954.1749 or via email at klee@schulzproperties.com
