Leasing commercial space is often one of the biggest monthly expenses for business owners. That makes it essential for startup companies and established brands alike to take contract negotiations very seriously.
One of the most important considerations when choosing a space is negotiating lease length. However, no two companies are alike. While newer businesses may prefer the flexibility of a short-term contract, an established company may be able to use a longer lease as leverage to receive more favorable terms.
1. Landlords usually prefer longer leases
Landlords generally prefer longer contracts of five years or more. In addition to offering a stable source of income, longer terms make it easier for the landlord to recoup the expense of installing a new tenant.
Unfortunately, a longer lease may pose too much risk for a fledgling business owner who may want to avoid overcommitting resources or worry about future expansion needs.
2. A longer lease may have benefits for business owners
Short leases may offer the benefit of agility, but longer contracts offer potential advantages for companies with an established presence.
In addition to lower monthly rent per square foot for the life of the lease, a landlord may be willing to make significant upfront improvements to the space if he or she can secure a stable long-term contract.
3. Renewal rights are always important
Whether a business owner prefers a longer lease or a more flexible arrangement, a lease contract should always include clearly defined terms for renewal.
Even if an owner is uncertain that a specific space will ultimately work out, having the option to renew a lease helps to ensure the company has the benefit of choice when it comes time to consider future opportunities.