Negotiating a commercial lease in 2025 requires a strategic approach, focusing on understanding your business needs, researching the market, and being prepared to negotiate key terms.
Expect flexibility on certain clauses, including rent, lease duration, and renewal options, but also be prepared for potential counteroffers and the need to understand hidden costs. Most importantly, expect higher operating costs. Across the board, insurance premiums are higher, taxes are higher, and common area maintenance charges have increased.
Many real estate professionals from the residential side of the business view commercial documents as a different language. Alongside major differences in wording, different negotiation tactics are considered the norm in commercial leasing. Unique elements of property and business operation, such as revenue from the commercial tenant and property taxes of the building, are often talking points when discussing the terms of the lease.
Negotiation Expectations
A lot of small business owners sign commercial leases without reading them or even having an attorney look them over. Also, they believe they can’t discuss a commercial lease. Sometimes that’s true, but the lease might not be the best choice for your small business. When you sign a commercial lease, here are some common mistakes to avoid and big points to consider:
Triple Net Fees
When negotiating a commercial lease in 2025, expect to discuss ‘triple net‘ out of the gate. Property taxes in many areas around the country are continuing to rise. This is putting tremendous pressure on landlords and investment companies to raise rents and other fees.
Don’t be surprised to see a landlord forced into selling a commercial building because of the increased costs of ownership. For property owners considering this route, this resource outlines how to sell a commercial property. However, not every landlord will sell when the pressure is high. Some of these fees will be passed onto you as the tenant through common area maintenance reconciliation.
To combat increased real estate costs, landlords may use triple net (NNN) leases. NNN leases for a commercial property typically include property taxes, meaning the tenant covers this important fee. If the property taxes increase year-over-year, the triple net fee likely will too. Triple net leases can also include utilities, maintenance of the building, insurance, and other fees.
Here is where the negotiation comes into play. You can attempt to negotiate the total amount that you would pay for the triple net portion of the lease. In commercial real estate, it’s common to see this figure based on a dollar amount multiplied by the square footage of the unit. If the actual dollar amount of the triple net lease isn’t negotiable, you can attempt to negotiate what it covers. Your business may not need weekly trash removal or other maintenance services within the unit.
You can also potentially bargain for a lower base rent since you cover more of the building’s operating fees in an NNN lease. Use any leverage you can when negotiating a formal commercial lease in 2025.
Build-Outs and Renovations
If you’re feverishly hunting for a commercial space to rent, you likely came across units that are complete buildouts. They don’t have any rooms, bathrooms, waiting areas, or other features. The unit requires a large renovation to bring it up to speed and make it ‘move-in-ready’. Depending on your needs and timeline, this may scare you away, as it does with many prospective commercial tenants.
However, buildouts are common in 2025. Tenants want space that aligns with their workflow, technology needs, and brand. In some markets where there are higher vacancy rates, landlords are offering tenant improvement allowances as part of the deal.
Owners of these commercial units expect to negotiate with tenants on what they want to do with the unit. Certain landlords will offer to pay for the entire renovation if a long-term lease is signed. Other landlords want the tenants to pay for the entire renovation. However, most negotiations meet somewhere in the middle. Obviously, renovating an entire unit is a huge expense.
However, when renovating it yourself, you can take the creative reigns when revamping the unit. It’s also important to negotiate what is allowed (or not) with your renovation plans.
Multi-Year Terms
You’ll be hard-pressed to find a commercial lease that is under 12 months. While they may exist, they are extremely rare. Many commercial landlords and property managers require multi-year terms when bringing on a new tenant. This is where the negotiation kicks off.
If they prefer a long-term tenant, you can use that as leverage when negotiating the rent and other fees included in your commercial lease. For example, you can offer to sign a 5-year lease but have the rent lowered for the first 3 years of the lease. Nearly everything is negotiable in a commercial lease. Don’t be afraid to ask (politely) for what you want. However, do consider how competitive the commercial space is when making requests. If there are tons of other applicants, tread lightly when asking for the moon.
The Importance Of Commercial Lease Agreements
The future of your business depends on how you negotiate your commercial agreement. Now that you know more, you can make smart decisions about where to put your business and the terms of your gross lease. Remember that you can discuss every part of the lease, from the base rent to the rent for improvements.
You can get the best lease deals if you plan ahead. First, look at the prices that are being charged in your area. You should talk to a lawyer about the rules. Make it clear to the employers what you need. The most important thing is to know your business numbers and stick to your budget. Knowing the differences between the many types of leases can help you make a better choice. Understanding the differences between a gross lease and a net lease can help you negotiate and pick the choice that works best for your business.
Contact us as soon as you seal the deal so we can begin to help you manage your properties in the most efficient way possible!
