Tips for negotiating a commercial lease – Part 1

This two-part blog series is devoted to commercial leases: tips for negotiating advantageous terms, as well as guidelines for evaluating whether it might be time to move on.

As context, consider the example of Manhattan’s Park Avenue office district. The name is often associated with big corporations and investment firms. However, a recent article profiled several big-name departures, questioning whether the landlords might have vacant lease properties to fill in upcoming years.

Specifically, Citigroup and Major League Baseball have both declined to renew their commercial leases, and JPMorgan Chase is reportedly negotiating a termination of its existing lease. By one estimate, nearly 10 percent of Park Avenue’s commercial property might be vacant in the coming years, comprising over two million square feet of office space.

Granted, most commercial lease periods are for several years, and lease provisions often require a tenant to provide notice of its non-renewal several years in advance. However, the instant example also raises the issue of when a tenant might consider renegotiating commercial lease terms or moving on. Two theories to explain the Park Avenue departures are the desire for more modern office spaces, rather than the existing 1950s style, as well as some industry downsizing.

The parameters of a commercial lease can vary greatly. As long as the contract applies with applicable laws, including zoning regulations, the precise terms are often open to negotiation. If a commercial landlord has many vacancies, a prospective business tenant may have leverage to request significant concessions from the landlord.

Since negotiation plays such a large role in commercial leases, most businesses consult with a law firm that focuses on business and real estate law, such as ours. In our next post, we discuss several tips to consider when negotiating a commercial lease.

Source: Crain’s New York, “Is Park Avenue losing its luster?” Daniel Geiger, Aug. 21, 2016