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Get the Best Deal on Rent

Tips to help you negotiate the best deal on commercial real estate.
September 28, 2009
URL: http://www.entrepreneur.com/article/203526

Q: I'm thinking of opening a coffee shop, but I've never signed a lease before. What should I do to get the best deal on rent?

A: In today's economy, the best way is just to ask. With commercial rents down as much as 50 percent in major markets nationwide, cash-strapped landlords are offering sweetheart deals on long-term leases to retailers and business owners savvy enough to take advantage. But locking in low rent is only part of what it takes to negotiate a great deal. Before you sign on the dotted line, you'll need to do your homework.

First, ask yourself what kind of space you really need for your business. Do you want to be on a busy street corner or in a mall? Do you need a big store with 5,000 square feet or just a small one? What about high ceilings, hardwood floors or basement storage? It's also important to run the numbers to find out how much space you can afford in the location you've chosen.

"When you execute a lease, you'll need to come up with the first month's rent as well as the security deposit, anywhere from four to six months if you have good credit," says Roxanne Betesh, senior managing director of Sinvin Realty LLC, a commercial real estate broker in New York City. "You're also responsible for your own electricity, cable and phone service."

As a startup, you may need to compromise on the size of your space in order to secure a prime location. On the plus side, many landlords, especially in today's economy, may be willing to throw in several months' rent for free. That's important if you're going to need to bring in contractors, plumbers and electricians to build out your space before you open your doors. Once you've found the space that's right for you, it's time to submit an offer.

"Be prepared to have your business history, bio and financial information ready for the landlord to review," Betesh says. "The stronger your financials, the more attractive you'll be to the landlord. Once the landlord sees you as a desirable tenant, you have an excellent opportunity to negotiate a great deal."

Note: Commercial real estate brokers typically receive a commission from landlords in return for finding them tenants to rent their space. While an experienced broker may often be able to help you negotiate a better deal, you may also want to contact landlords directly or visit a website that lists commercial properties for rent.

Rosalind Resnick is the founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses. She can be reached by e-mail at rosalind@abcbizhelp.com or through her website, abcbizhelp.com.