Steps for negotiating a commercial lease in Pennsylvania

On Behalf of | Apr 21, 2023 | Real Estate

Prime commercial space isn’t always easy to find in Pennsylvania, but today’s commercial real estate market positions business owners to find the right spot for their company and negotiate favorable terms.

Types of retail commercial lease

Retail spaces differ somewhat from other commercial properties because they have requirements like access to foot traffic and parking that are less essential for other types of commercial enterprises. It’s also important to find out if the location is zoned for retail business. There are three general types of commercial leases:

  • Gross, or full-service lease
  • Net leases
  • Modified commercial lease

The main differences between the first two are the degree of responsibility placed on the tenant for things like utilities, property taxes, and maintenance. Gross leases are typically all-inclusive while net leases require the tenant to take responsibility for a portion of some expenses above rent. The modified lease offers a blend of the best attributes of net and full-service leasing. All of these things are negotiable if the tenant is armed with information.

The importance of negotiating terms for commercial leases

Commercial leases tend to be long-term. That makes it essential to negotiate the best possible terms. A well-written and negotiated contract can provide protection for all parties and help avoid property disputes or being locked into a contract when the location turns out to be less than favorable.

Negotiating a retail lease

Unlike other types of real estate rentals, commercial leases require some targeted negotiating over terms to find the best fit for landlord and tenant. Things that are typically negotiable in commercial real estate contracts are:

  • Subleasing
  • Penalties for early cancellation
  • Fixing time for improvements
  • Incentives like staff parking or Wi-Fi access
  • Renewal terms

The first point of negotiating is the monthly lease amount itself. Don’t offer the list price up front. Research the market value of comparable locations in the area and negotiate from a position of power. It can also help to work with an agent who is experienced with commercial leases and knows the local market.

Negotiations are about give and take, so be prepared to concede a few points to gain on more essential factors like fewer maintenance expenses or preferable parking.