For a business to succeed in the cutthroat world of commercial real estate, obtaining a good lease is essential. Although it's normal practice to negotiate the base rent, there are other approaches that can ultimately result in significant cost savings. Here are three non-traditional strategies to think about for your next business lease negotiation:

1. Embrace the Percentage Rent Model:

Provide a rent structure in place of a fixed base rent, that is flat (without increases) throughout the entire intial term. You can then link the amount of rent you pay to a predetermined percentage of the sales revenue of your company. You, as the tenant would pay a percentage rent above the breakeven point, on any sales above this threshold. This offers flexibility and may lessen your financial strain during slower times, which can be especially helpful for startups or organizations with erratic revenue. It also allows the landlord to share in your increased business, so can be a win-win for both parties.

Negotiation Tips:

To persuade the landlord that this strategy would benefit them in the long run, be ready to present your solid financial projections and growth possibilities. Also, try to set cap on the percentage rent that must be paid in any given year, but make sure that cap is high enough to entice the landlord into accepting a lower base rent, tied to your sales. Note: This structure may afford you a lower base rental rate, but you may end up paying more in total rent over the life of the lease, if you kill it with your sales.

2. Explore Higher or more Frequent Escalation Clauses:

Strike a lower starting rental rate, by offering the landlord either a higher than typical annual rent increase, or rent increases every 6 months. This way, even though the landlord is accepting a lower starting rent (to help you get started), they will make it up on the back-end with the hiher rent escalations. Be aware that with higher, or more frequent, rental increases, you may end up paying more on a monthly basis near the end of the lease, than if you structured the lease in a more traditional manner.

Negotiation Tips:

Make sure the first rent increase is realistic for your businss and expected growth, and doesn't interfere with how your business is run.

3. Take on Renovation Responsibilities:

If the property has to be renovated, think about offering to take it "as-is" with the caveat that you will pay for the work to be done. Both you and the landlord may benefit from this, as you can tailor the area to your own requirements and the landlord can save money on renovations.

Negotiation Tips:

To prevent any misunderstandings later on, specify the extent and timing of the renovations in the leasing agreement, also called a work-letter. This work-letter should outline specifically the type of work you will do, as well as minimum/maximum costs, and time frames for completion.

Remember that conducting thorough research, being organized, and being cooperative are necessary for successful negotiation. You may acquire a commercial lease agreement that supports the expansion of your business without going over budget if you take into account these alternate techniques and go into the discussion with a clear grasp of your demands as well as the landlord's perspective.

For more information on how to negotiate the best lease structure for your business, do not hesitate to reach out to: info@cbicommercial.com