Friday, May 15, 2009

Options in Commercial Real Estate Leases

Dear Property Manager:

My one-year lease is almost up on my new business. I was given a discount on the price by the landlord since I was a new business, which has helped a lot, but it was only a 1-year term. Things are going well, and we have steady growth. I am trying to figure out what the best option is for me—whether to stay, or go, what the rent price will be etc. Can you tell me what my options will be if I want to stay at this location? The lease is up in August, and I know I need to handle this soon, but I am going into my busy season and have so much on my plate right now… help!

Dakota J.
Concord, NC

Dear Dakota,

Congratulations on your business success – and good luck on your exciting future!

When your commercial real estate lease is coming up, you are several options. The first option would be to renew, however, since landlords will want to raise the rent at the end of the initial agreed period, and you were given a “starter-business rate,” you will need to handle this immediately. If you can get an option to renew at a great fixed price, you may want to try to extend your lease term to 3-5 years to avoid the possibility of rent going up again this time next year.

You could also choose a short lease, (if your commercial landlord will grant you one) with one or more options to renew to give you some flexibility. In this case you will probably have a certain block of time before the initial lease term ends in which you can notify the landlord that you wish to renew. Be aware there may be an additional fee.

Another option you may wish to consider is the option for additional space, so that you can grow and expand your business. If the landlord believes in your business and your ability as a tenant to attract other businesses of interest they may offer you this additional space at a deep discount. Good luck again, and make sure you take the time to handle the details of your commercial lease as soon as possible. Where your business is located, and the ROI of that is paramount to the success of your growing business. If you would like to look at other property options in the Concord area, or discuss your options, feel free to call our Concord office at 704.973.9017.

Property Manager
Kuester Property Management
Concord, NC

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