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How do commercial landlords price leases?

On Behalf of | Jan 15, 2023 | Commercial Real Estate |

You should never sign up for a lease if you do not fully understand the cost. Yet that is not as straightforward as it seems, as not all commercial landlords price things in the same way. A property that, at first glance, seems a better deal than its seemingly identical neighbor could turn out to be the more expensive of the two. 

As your premises are likely one of your company’s most significant outgoings, even a slight misunderstanding could make your profitability forecasts invalid.

What does the price include?

Most landlords do not offer an all-in price. They will expect you to pay several extras, often ones that can vary considerably, such as energy bills. That can make budgeting harder.

Other common exceptions are maintenance and taxes. In addition, some landlords (particularly those of shopping malls) will stipulate you pay them a commission. The better you do, the more you will have to pay them. 

You also need to understand how prices could change

Only agreeing to a year-long contract might seem wise if your business is only starting. Yet, if the landlord retains the right to vastly increase the rent, you may need to leave after 12 months, even if you have a successful first year.

You need to understand how often they can increase rent and by what percentage. That way, you can calculate possible future costs. With the location being crucial to so many businesses, having to move could cost you customers — as well as being inconvenient.

Consider legal help to ensure you understand a commercial lease contract fully before signing. You may even be able to negotiate for something more favorable.