Choosing the most appropriate lease term length is among the most important but often overlooked decisions involved in finding new commercial space- from the search itself to the lease negotiation and the transition between old and new offices.
You must carefully consider several factors, such as budgetary constraints and projected growth, to ensure your lease doesn’t inhibit cash flow but still allows for ample expansion opportunities.
Also, where would you like to be in ten years? What about three or five years? Are you aware of this? You may encounter a few tricky questions when you are looking to lease a commercial property. Maybe not how you’ll look or perform in the future, but how your commercial property will do.
Axis property has compiled a detailed list of the advantages of both short-term and long-term commercial lease options based on these varying factors so that commercial real estate investors can select the term length that best suits their particular needs and expectations. If you are looking for a commercial real estate lease option, this article will surely help.
Advantages of signing a long-term commercial lease
A landlord is interested in signing a long-term lease with a tenant. Why is that so? Finding and accommodating tenants in their properties is an expensive process. Furthermore, the process is usually uncertain and can take quite a long time.
Therefore, landlords usually give you better terms if you stay in their space for a longer period of time. It is a guaranteed source of cash flow to have tenants. There should be as few vacant spaces as possible for landlords because vacant spaces cost them money each month.
When you sign a long-term commercial lease, you are essentially establishing roots. Therefore your financial situation is stable. The cost of real estate is usually the second or third largest expense of an organization. You will be able to project future budgets with accuracy and reliability by signing a long-term lease. By accurately assessing your company’s best options, you can close in on this uncertainty for such a significant cost.
Rents are predictable:
Since you will know exactly what your rent costs are from year to year throughout the lease term, you will be able to lock in rates and forecast rent costs. A shorter lease term will likely result in higher rents and higher yearly increases.
Advantages of signing a short-term commercial lease
As opposed to long-term leases, where you have to sublease or transfer the lease to another tenant to relocate, short-term leases allow a company to quickly move on to new locations without dealing with long-term contracts and how to terminate them.
Small and new businesses aren’t sure how quickly they will grow or how large they will become, making commercial real estate challenging. These businesses may find it challenging to get into a new lease for long periods of time since they don’t know what their company needs, but short-term leases offer them the flexibility they need. Additionally, it allows them to move to different spaces as their business grows.
Undoubtedly, most companies may fail within their initial years of operation. The advantage of a short-term lease is that you won’t have to pay the landlord a large sum of money if you decide to terminate it.
Your organization would do well to pay special attention to details when moving into new office space. If you’re meticulous with your planning and negotiations, you can turn your lease term into a powerful benefit instead of a hindrance as you choose the right length for your commercial real estate needs and growth expectations. Our team at Axis property is always ready to assist you not only in finding the right space for your business but also in negotiating terms that work for you.