LEASE NEGOTIATIONS TIP

It’s crucial for the long-term success and saleability of your business that you negotiate both a sustainable rent and good lease terms. Always ask for a better deal!

These negotiations are usually done early in the process. What is available will depend on the type of premises, its location, and whether it is a new or existing location.

It’s important to maintain a good working relationship with the agent / owner / centre management, so you might want a third party consultant to negotiate for you. They are professional negotiators who will push a lot harder and ask for a lot more than you might feel comfortable doing yourself.

Negotiable items may include:

Base rent
Outgoings – Landlords’ costs such as building insurance and trade waste
Rent-free period – Usually only available to new businesses to offset construction and fit out time
Contribution to fit out – Usually only available to new businesses, and usually in shopping centres or company-owned buildings and complexes (can be the equivalent of 6 to 12 months’ base rent)
Annual rent increase – Commercial rents usually increase by 5% per year. You may be able to negotiate this to a level closer to the CPI rate (around 2%), achieving a saving of $1500 per year on an annual rent of $50,000
Lease period – Consider the capital investment you are making when negotiating your lease period (5 years is common). Depending on your plans you may want an option for an additional lease period, something that’s important if you intend to sell further down the track.

A lower and more sustainable rent makes your business easier to operate, more profitable, and increases its value. Good lease terms also make the business more attractive when selling.

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