By Brett Saladin | Goldmark Commercial | Real Estate Agent
Negotiating commercial leases can feel overwhelming, especially if it’s your first time or you’re facing unique property challenges. As someone with hands-on construction experience and commercial real estate expertise, I’ve learned that understanding the building and maintenance side of things can give you a significant edge during lease negotiations.
Whether you’re a tenant or landlord, these insights will help you negotiate lease terms that realistically reflect the property’s condition and your business needs.
Know What You’re Getting Into: Inspect and Assess
Before negotiating, it’s crucial to assess the property thoroughly. That means looking beyond the surface to understand the building’s structure, systems, and potential issues. For example, check the roof condition, HVAC system age, electrical capacity, and parking lot quality.
From my construction background, I know that deferred maintenance or needed upgrades can impact both your budget and timeline. Knowing these details upfront helps you negotiate who is responsible for repairs or improvements and when they should be completed.
Tenant Improvement Allowances (TIAs): Clarify Scope and Costs
Many leases include Tenant Improvement Allowances (or TIAs), which cover build-outs or modifications a tenant requires. In my experience, clearly defining the scope of these improvements and who pays for them is essential.
Discuss whether you’ll receive a lump-sum allowance or if the landlord will manage the work. If you’re handling improvements yourself, negotiate deadlines and inspection checkpoints to avoid costly surprises. Construction knowledge allows you to estimate realistic costs and timelines, making your requests more credible.
Maintenance and Repair Responsibilities
Commercial leases often include provisions about who handles maintenance and repairs. These can be points of negotiation that have a big impact on your ongoing costs.
As someone familiar with construction, I advise clients to pay attention to:
- Structural repairs: Usually landlord’s responsibility but verify.
- HVAC and mechanical systems: Negotiate who pays for regular servicing and repairs. Consider an annual cap the tenant pays up to if the Landlord insists repairs and/or replacement is on the tenant.
- Common area maintenance (CAM): Understand what’s included in CAM charges.
- Snow removal, landscaping, and other property services: Sometimes tenants handle these, which can affect costs.
Having clear definitions helps avoid disputes down the road.
Rent and Escalations: Reflect Building Conditions
Rent levels and escalation clauses should reflect the property’s current condition and the cost of any improvements or services provided.
For example, if a building lacks certain amenities or requires tenant-performed maintenance, this should factor into the rent. I’ve worked with clients who’ve successfully negotiated lower base rent by highlighting these factors.
Conversely, if the landlord provides upgraded finishes or common areas, that justifies higher rents. Having construction insight helps you evaluate if rents are fair based on building quality and service levels.
Understand Build-to-Suit Options
If the space needs significant customization, a build-to-suit lease can be a smart solution. This is where a new building is constructed specific to a tenant’s requirements. My construction experience allows me to advise clients on negotiating these agreements, including timelines, cost responsibilities, and quality standards.
Build-to-suit leases protect tenants by clearly defining what’s included and when the space will be ready, which minimizes risk.
Communicate Clearly and Early
One piece of advice I give Clients is to communicate clearly and early with landlords or tenants about your construction-related concerns or needs. Having a transparent conversation upfront helps set expectations and builds trust.
When I negotiate, I try to frame requests with explanations and data, which resonates better with all parties. For example, explaining why a roof repair is necessary before a lease term begins helps landlords understand the urgency.
Final Thoughts
Negotiating commercial leases is about more than price—it’s about understanding the space, the responsibilities, and the costs that come with it. My construction background gives me the confidence to advise clients on realistic lease terms that protect their interests and promote long-term success.