Your business is growing, but is your commercial lease poised to keep up? Many commercial lease agreements are designed with only today in mind, but your business needs to look to the future. Before signing your long-term lease, businesses should make sure that the agreement is also designed to fit in with their overall growth goals. Here are a few considerations before you sign:
- Determine Your Goals. Before you even start looking at spaces, it is important to think about how any leased space fits into your overall business plan. Maybe you’ve been operating online only and are ready for a brick-and-mortar location. Maybe you are ready to hire and realize that you need more office space for a growing team. It’s important to think about what type of space fits your needs today. And what does your look like in one year? In three years? Do I need a customized space?
Once you’ve identified the ideal footprint, it becomes easier to start shopping for it.
- Prioritize Flexibility. Landlords are often looking for the stability of a long-term tenant. For growing businesses, however, it often is helpful to avoid locking yourself into long-term commitments. Look for shorter-term leases or agreements with renewal options. This may look like co-working spaces or shared facilities. This is especially useful if your headcount or space needs could change quickly.
- Consider Assuming a Lease or Subletting Space. Taking over all or a portion of a space from an existing commercial tenant can be advantageous to a growing business, especially from a tenant in the same industry. An assignment lets you begin operations under whatever time and terms are left under a master tenant’s lease agreement. A sublease similarly allows you to enter into an agreement with an existing tenant to use all or a portion of their space.
The drawback to this approach is a sometimes-lengthy approval process from the landlord. Additionally, there is a limited ability to negotiate any of the terms under the master lease that another tenant has already signed onto.
- Maintain Your Own Ability to Assign or Sublet. To the maximum extent possible, maintaining the ability to sublet or assign your longer-term lease to another tenant allows you a path to exit or reposition yourself, as needed. This is a point for negotiation during your initial lease negotiation process.
- Consider a Phased Expansion. Rather than leasing (and paying for) more space than you need upfront, look to the expansion rights around you. Starting with a smaller footprint and requesting a first right of refusal to adjacent space when it becomes vacant, for example, will allow for incremental expansion if needed.
- Consider Early Termination Options. When your outlook needs to remain flexible, look for lease agreements that offer an early termination option. This allows you to move to a new space more freely and avoids becoming stuck in a space that no longer fits your business needs.
A growing business may need to approach its search for commercial space in a way that maximizes its growth potential. Reach out to the attorneys at Way Law to help you negotiate the commercial lease that prioritizes your business’s growth needs!