How to Make an Offer on New Office Space
You've found the office space of your dreams. The square footage is right. The location is perfect. Best of all, it's within your budget. The space suits all of your requirements. You are ready to make an offer, but are unsure of how to proceed.
Here's what you need to know about preparing yourself for the negotiation process, writing the letter of intent, and finalizing the lease.
Do Your Homework
Do upfront research on average square-footage prices for comparable commercial properties in your area. Familiarize yourself with the features of commercial leases. For instance, most commercial leases have longer terms than residential leases (standard terms are three to five years). You'll also want to make sure you understand the necessity of various clauses, such as the right of first refusal in the event that a good opportunity arises.
Get Organized and Be Open to Help
Have ready access to all your financial documents—i.e., bank statements, tax returns, and credit information—that could be requested by prospective landlords.
In addition, it may be wise to seek professional assistance from a lawyer, a tenant-broker, and/or a commercial leasing agent, as needed. They'll help you navigate through unfamiliar territory in order to get the best deal.
Write a Letter of Intent
The letter of intent is usually the first step in closing an office leasing arrangement. It shows you're serious about moving forward, but as a non-binding document, it gives you the flexibility to negotiate the fine points of the deal before signing a lease. Most letters of intent have an exclusivity clause, meaning both parties agree not to seek another deal while negotiations are underway.
Either the landlord or the tenant (or the legal representatives of either) can write the letter, which is typically one to two pages in length. The letter covers key items like a description of the space, the tenant's intended use for the property, start date of the rental, length of the rental, any agreed-upon renovations with a timeline for completion, rental costs and additional fees, and conditions upon which you can renew or terminate the agreement.
Be Prepared to Negotiate
The negotiation process is when you can secure your best deal. For instance, you may be able to negotiate lower rent in exchange for something the landlord might value, such as a longer lease term. Other potential negotiable items include a clause that allows you to sublease or implement a cap on rent increases.
Finalize the Lease
It's important to review the lease carefully to ensure everything negotiated is contained within this legally binding document. This is a point at which professional assistance in the form of an attorney or a commercial lease review agent is most valuable. With their advice, you'll have confidence that all aspects of your lease—even down to the number of parking spaces you're entitled to and the use of common areas—are covered in full.
