How to Negotiate a Commercial Lease for Your Business

Dec 7, 2022 2 min read

You’ve outgrown your home office. Whether it’s because you need more space for your inventory or for your people, choosing the perfect location for your small business is a big move — and an expensive one. Negotiating a commercial lease may seem intimidating, but these commercial lease negotiation tactics can make the process pain-free.

1. Know What You Want Before You Look

It’s important to have some parameters before you fall in love with an out-of-budget space. As a first step, outline your budget, your must-haves and your dealbreakers. Think about location, parking, square footage and nearby businesses. This is a smart time to review your business plan. What are your short- and long-term goals? What resources do you need to meet them? What can your business realistically afford?

2. Consider Hiring an Agent or Lawyer

Can you imagine navigating the home-buying process without the help of a trusted real estate agent? Experts exist to make your life easier. A commercial real estate broker or lawyer will come with a fee, but bringing in professional help will likely result in a lower rent and more favorable terms.

3. Conduct Market Research

Thoroughly investigate the local market before negotiating a commercial lease. Perform a comparative market analysis to ensure you’re prepared to sign a fair contract. Collect everything you can about the property, including square footage, year built, taxes paid and renovation information. Determine how the asking price compares to other properties in the area. Bonus: If you have a real estate agent, they’ll do this for you.

4. Understand Commercial Real Estate Terms

Before you tackle the nitty-gritty leasing items, let’s dig into some helpful terms to know. Commercial lease agreements typically fall into three categories:

  • Gross lease: The landlord pays for costs associated with owning the property, including repairs, insurance, utilities and property taxes.
  • Net lease: The tenant is responsible for the above items. A triple-net lease is one of the most common types. In this type of lease, commercial tenants generally pay taxes, utilities and operating costs.
  • Modified lease: This type of agreement includes elements of both gross and net leases, agreed upon by the two parties.


5. How to Negotiate a Commercial Lease Price

Can you negotiate commercial rent? Absolutely! A landlord will often list a space at a price they hope to get, rather than the one they expect to get. Start haggling by asking to cut rent by at least 10%. You should also seek out these options:

  • A free month (or two): If landlords aren’t willing to negotiate base rent — perhaps due to devaluing the property for other tenants — a free month or two is a helpful workaround.
  • A shorter term: Being locked into a five-year lease may be a bit scary; a shorter term gives you more flexibility.
  • A longer term for cheaper rent: On the flip side, if you know you’ll use the space long-term, use that to your advantage for a cheaper monthly bill.
  • An exclusive-use contract: With this clause, your landlord can’t bring in a competitive business.
  • A rent-free fixturization period: The landlord should afford you some time before paying rent to build out your office space.
  • Additional amenities: Offerings like free Wi-Fi, parking, fitness facilities and even daycare can offer substantial savings in the long run.

Better for Your Business

At Farm Bureau, we help you build up your business. Contact a local agent today to ensure your business insurance is working as hard as you are.

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.