Fantastic economic terms are a given in today’s real estate market, but don’t let the upfront concessions distract you from the important deal points in your lease.
Three years from now, the “six month’s free rent” will be long gone, but you still will be living with your lease document. Make sure your lease is an asset and not a hindrance to your organization.
Most of our clients require a tremendous amount of flexibility.
· Government contractors need to align lease expirations or options to terminate (or downsize) with contract expirations. Another critical item is ensuring that our client is not paying to remove specific (SCIF) improvements upon lease expiration.
· Biotech companies need to be able to make changes to the space from time to time when laboratories and equipment change. If dollars are amortized up front, what is a fair rental rate for the renewal after the tenant has paid off the improvements through rent and made a huge investment in infrastructure? Most importantly, let us not forget to define who owns the equipment at the end of the lease term.
· High-tech companies have trouble seeing far into the future. For them we need to build in ultimate flexibility while ensuring that they receive today’s concessions (even if that means waiting on the concessions until after termination options have passed). Tech companies always plan for growth, but at what cost and what if the growth is steady rather than the dynamic growth they planned for? Will the friendly landlord tear up a lease if the need is 1,000 additional square feet? What if you overestimated growth? Will the landlord take back space? Will the landlord charge you if you need to install equipment on the roof or install a generator?
The current market affords tremendous opportunities for tenants. It is important to focus on what is important and negotiate a strong lease document that meets or exceeds your organization’s current AND long-term goals.