Where you choose to locate your business could make all the difference to it’s success. But too many business owners and executives find the right place to open their doors, only to pay far too much for the privilege of doing so.
Controlling your lease costs starts with understanding the advantages of your position says Dale Willerton. “Remember, the tenant is the customer to the landlord, and the customer has a lot of control; tenant’s just don’t realize that,” says Willerton, the founder of The Lease Coach and co-author of Negotiating Commercial Leases & Renewals for Dummies.
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Willerton learned the leasing trade while working for commercial landlords, and that experience attuned him to the problem with the rental process “When I was sitting on the landlord’s side of this desk, I could see tenants come in and leave a lot on the table,” he recalls. “They did not know what they were doing.”
A favourable rent deal is a cost control measure available to all businesses, not just ones that are opening a new location or shifting into a new space. “Every year, approximately 100,000 new leases get negotiated [in North America], but 2 million lease renewals get negotiated,” says Willerton. Many business owners would balk at the prospect of shifting their office, retail outlet, restaurant or warehouse. But that doesn’t mean you shouldn’t use the the threat of moving out of your space to force some concessions from the landlord.
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Here are three ways Willerton says you can reduce your rent costs, whether you’re leasing a new space or renewing your existing agreement:
Most listings and leases still go through old-fashioned real estate agents. Having someone to identify potential new homes for your business can reduce your own time commitment to location-hunting, but don’t rely on that person or firm to get you the best rate possible.
“Don’t assume the real estate agent is in your corner trying to get you a good deal,” cautions Willerton. “Even when both landlord and potential tenant have different agents, Even if there’s two real estate agents—the landlord’s agent and the tenant’s agent—typically, they are splitting a commission paid by the landlord.”
Make sure that you’re not following your agent’s advice blindly. While they may be acting perfectly ethically, an independent third-party perspective can help you confirm that you really are getting the best deal possible.
Location, alternate location, alternate location
Sometimes, you just fall in love with a place. The space is just right the side, it’s conveniently situated, and you can see where all your fixtures and equipment will go—you’re ready to sign on the dotted line.
But don’t let the landlord know how enthusiastic you are about the location. “The way to really improve your position when you’re negotiating on commercial real estate is to find and negotiate with multiple landlords simultaneously,” says Willerton.
Even if you’ve committed to a location in your mind, you have to make it look like you have alternatives. “We can use other locations as decoys to get [your] favourite location’s landlord to give them a better deal,” he says. “You need to negotiate on multiple sites simultaneously.”
Slowly does it
You can’t simply sign the lease and then call the movers to pick up your furniture and equipment. “It takes a lot longer to go through the leasing process than most tenants realize,” cautions Willerton.
The Lease Coach says he regularly hears from business owners whose renting situation has gone bad after the deal was agreed and signed. “His rent kicked in before his front doors were even open for business, because he didn’t think it would take a month for the landlord to send back the lease document, or it would take nine weeks to get building permits,” Willerton says.
Having a realistic understanding of your move-in timeline can help prevent such a situation. You’ll have to pay rent while you renovate or repurpose the space, so make sure you’ve budgeted accordingly. Figure out if you need to be maintaining two locations simultaneously to smooth the transition. Maintaining your productivity and profitability while you transition may be worth the short-term rent costs from these decisions.
For more advice on negotiating a commercial lease, including key contract clauses to review, listen to this week’s BusinessCast by clicking the button above or download by clicking on the iTunes logo below:
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