How Independent Businesses Can Handle Rising Rental Rates

Increasing real estate value concept

Commercial rental rates are on the rise because of demand. More businesses are moving in urban areas as more consumers choose walkable, mixed-use urban districts. In addition, national chains are driving up prices as these big businesses hunt for space in cities.

Supply, meanwhile, is low for small businesses because new buildings offer spaces that favor bigger businesses. They can afford to pay more, and they may opt for long-term leases.

As a small business, higher rents might force you to leave your current location, especially when you have to renew your commercial lease. Office Space Experts recommends having a proper lease administration to keep track every detail of your lease, including rent increases.

Handling Commercial Lease Renewals

You may have to face lease renewal negotiation with your landlord. Expect that your landlord may increase the commercial lease. This negotiation process could take some time, too. But with an effective negotiation approach, you can keep your office space without hurting your budget.

One negotiation tactic is to create a competition for your tenancy. Find other commercial lease options that you can use for comparison. This could prompt your landlord to offer a better rate to keep your business.

When your venture is successful in your area, your landlord might take advantage of this success and ask you to pay higher rent on your next tenancy. They would think that you’re less likely to relocate.

You may also ask other tenants who have recently renewed their commercial lease to get an idea on how their renegotiation went. They may also give you a hint about the terms the landlord might agree to.

Acquiring a Favorable Commercial Lease

Businesspeople signing a contract

Negotiation could help you get a commercial lease that works well for you. It’s essential that you fully understand the terms in the lease for a favorable negotiation and to avoid misunderstanding.

Before signing a lease agreement, ask yourself if you have negotiated enough. Have you addressed any concern regarding future repairs on the property and who will pay for the cost? If the landlord insists you pay for the repairs, you may be able to ask for a reduced rate on the lease.

Some landlords offer higher rent because they expect you to submit a lower counter offer. Your landlord may approve your offer or submit another offer until you reach a final agreement. It’s also worth noting that not every commercial lease is open for negotiations because there are landlords who offer fixed rates.

There are also terminologies included in the contract that you need to learn. For example, most lease agreements have Common Area Maintenance (CAM), which covers extra fees. It typically requires tenants to pay on a pro rata basis. If you take up more square footage, then you pay more under CAM. Your expenses go up depending on whether your lease agreement specifies a variable or fixed rate.

Rent is part of your general and administrative expenses, and expect it to increase from time to time. As a business owner, you have to prepare yourself for these circumstances. You have to equip yourself with enough knowledge on how to handle these challenges.