How to negotiate leasing retail space?

[GTStudio]

I am looking for a space to lease to operate a tanning salon and have narrowed it down to two choices. This will be my first retail business therefore I have never negotiated a lease. After searching through this site and doing some hardcore googling I know what I want to have in my lease, and what I don't, but I don't know how the actual negotiating process goes.

I assume that I would meet with the leasing agent and go over the details of the space and then receive a copy of the lease. I would then be able to take it with me and make changes. How long does one typically have to edit the lease? I would prefer to do it myself but if I need a lawyer I will have one look it over. If I do it myself do I just start crossing items out and writing new ones in? You know what they say about assuming, which is why I'm asking because I would rather know than guess. If anyone could tell me how this process works I would appreciate it.

[The Grinder]

I haven't done this in yrs but...the landlord should tell you how long you have to approve or make changes to lease. I'm not aware of any standard wait time. So thats negotiable in itself. I assume you have bickered back and forth with who pays for the buildout, if you put up your own money, that would lower the rent, but if they spring for that, the rent goes up.

Back in 1983 my first landlord financed the remodeling via himself, but I paid him back so much per month for 36 months, meaning after 3 yrs, my rent dropped considerably.

Does your LL own and manage other properties?? If he's a major player, I'd consider wrapping this up using your own attorney. Here's a case where they are needed. Good luck!

[GTStudio]

Thanks Grinder for your input. Yes, each LL is a major player in commercial retail development. I may use a lawyer to make sure the terms are as fair as possible for both parties.

Anyone else have any info that could be of use?

[Dmc5]

Don't be afraid to ask for what you really want...it's a tenant's market.

And has been said on here may times ( you really should "search" this subject if you haven't already...no amount of $$$ spent on advertising will make up for an inferior location. And a block or 2 can make all the difference.

[GTStudio]

Thanks Dmc5. Both of my options are brand new developements. My first choice is a center that is being constructed now. It's at the end/entrance of a major interstate that turns into a high traffic state route. The storefronts will be easily viewable from the interstate. There is a large university less than one mile away, plus lots of apartment compexes and rooftops within a three mile radius.

My second choice if things don't work out with choice #1 is a very large shopping complex with two supercenter grocery stores. This center is partially completed already and on the same interstate as above. The center is on the border of two cities. One is upper middle class and the other is lower middle class, it's split by the highway. Lots of residential property in this area.

Option 1 has the high traffic area, university, residences, and is viewable from the interstate.

Option 2 has the supercenter stores and the diversity of two different communities with large populations. Also, I know the company that developed this project is having financial problems right now. Realistically they may go bankrupt, but if they can work it out this center will be huge. It's a risk so maybe it shouldn't be an option.

Both are brand new developments.

[Dmc5]

Some years ago, I managed the jewelry dept in a dept store that leased the individual departments to seprate vendors. When the rent didn't get paid, it got ugly...the health of the biz I was renting from would be huge for me.


I'm just going to throw this out to you, and let's see where the thread goes...

We assume that higher end neighborhoods are obviously desirable, because there should be more disposable income. Except that the higher level income can also (possibly) afford the $ and space to put a bed in their home. In my experiance, they are more likely to order lotion over the internet. They can tend to be "cheap" they have $ ,but won't part w/ it, which is why they have $. They are also less likely (my oppinion) to need to get out of the house and tan, just for the break from home to preserve what little may be left of their sanity. They tend to have more space and less children in that space. The lower incomes can afford less vacations, so tanning IS thier vacation...

So, everyone, just for fun, let's hear it...

[eyecandytanning]

i got myself a broker....he did everything for me, and cost me nothing. The landlord of the space i moved into paid him a finders fee. I def recomend this. He did all the back and forth etc for me, def cut down my stress

[GTStudio]

Eyecandy that is great info! I never thought of that. I will have to look into that as well. If something doesn't work out with these it would be great to have someone with more knowledge helping me. Having them negotiate what I want would be a lot easier on my part.

[eyecandytanning]

yep, there is no cost to you. I used someone that was recommended to me. I would never been able to get the rate on my own without his indepth knowledge of current commercial rates etc. When it came down to specifics of the lease, i read it and told him what i wanted changed, he negotiated it with the landlord. I would have gone nuts with all the back and forth etc

[SunMan49]

Seek legal Advice..your best bet. Need to be sure LL does not lease neighboring space to competitor, does not have clause where they rec'v % of retail sales, What about CAM?...will LL pay for outside signage? do they have any say on your operating hours, parking spaces..The list is endless...things left out could cost you the business. Think of all possibilities

[rclawren]

sunman is right on. you can bet that the LL had a lawyer construct his lease agreement, so you better have one too. make sure the lawyer specializes in commercial real property

[Din]

Get a lawyer. Your lease will screw you big time if you miss something in the legal mumbo jumbo. Your lease is one of the most important things in your entire business. I don't recommend you doing it on your own.

Things like exclusivity in tanning is fine....but what about current tenants adding it later. They may only give you exclusivity on Future tenants.

OR if it's a strip plaza with different buildings on the property, it may be worded for only the building you are in, not the other 4 on the property, so the hair salon across the same parking lot can add tanning and you can't do a thing about it.

There are certain things a business lawyer will explain to you that you have no clue about.

It's the most important investment you can make. Get a lawyer, don't cheap out on this.

[GTStudio]

I'm definately having a lawyer go over it for all of the reasons mentioned. I realized this isn't something to try to do myself. It is a large complex with several complexes located on the property. I will have to have a lawyer go through everything, I don't want to get screwed later.

[Din]

make sure your lease and exclusivity on tanning is included on the entire property, not just the 1 address.

Your address will be 123 Main St. Complex #2 on the same property is 135 Main St etc.. Etc... Etc... Make sure it's valid for entire property.

Landloard can sell one of the buildings to someone else, and keep the other buildings on the lot. Make sure your lease is valid for future landloard as well on the individual buildings. Your lawyer will explain it.

If he doesn't know what you're talking about....get a new lawyer.

[GTStudio]

^^^ Lol, very good advise. Will make sure to do that.

[MacDaddy]

Also, get something in the lease that if the big draw to the shopping center(EX. grocery store, WalMart, Gym, etc.) closes up and is the big box draw for the shopping center, then your rent gets adjusted or you have the option of getting out of your lease if they can't replace the store in a certain amount of time.

This will greatly affect the traffic to your shopping center if one of these big draw stores closes or relocates.

[GTStudio]

Originally Posted by MacDaddy

Also, get something in the lease that if the big draw to the shopping center(EX. grocery store, WalMart, Gym, etc.) closes up and is the big box draw for the shopping center, then your rent gets adjusted or you have the option of getting out of your lease if they can't replace the store in a certain amount of time.

This is something that I hadn't thought about. Great advise! Thanks!

[movieking]

There was a speaker at one of the tanning shows in the last year that does nothing but negotiate commercial leases. Hiring someone like him could be well worth it. Of course you would still want an attorney to review it. I've found that most attorneys aren't that great at negotiating the best lease. Ther're better at making sure everything is legal.

I can't remember where I saw the speaker but it would have been either the ITA show show in Nashville last year or one of the Ergoline shows.

Someone recommended that you hire a broker. That can be good also but as a landlord I can assure you the money paid to that broker is going to be factored into your lease so in a roundabout way you will be paying his fee.

[Stephen Underhill]

There is an art to negotiating the terms of a lease. There are many ways to get more in the terms than the landlord initial offering. Always negotiate the option terms up front. Everything you get does not have to be up-front. Landlords don't mind giving up things that they do not have to pay for. Getting someone to negotiate your lease for you can save you tens of thousands of dollars over the term of a lease. An attorney is great for looking at the legal language of a lease, however if they don't specialize in lease negotiation they are of no help.