Ideas on a rebuttal to the following terms

[Jamal L.]

Hey Bp Fam, 

Im looking into accepting the terms of this deal however, Im a little hesitant because  my initial request was to have at least 2 months of build out period without payment as the value I will be adding to the commercial  property will increase the properties value. 

Please give me your thoughts and advice on other terms that make it more advantageous. 

Current negotiation from LL

 Commercial lease Monthly Rent $6000 

Security Deposit will be $7000 (based on last month rent of the lease term)

Six Month Build Out Period - June 1 to Dec 31, 2024 

Lease to start January 1, 2025. 5 year term During the build out period the tenant would pay $3000 per month rent (June 1 to December 31, 2024)

The balance of $18,000 from the build out period would be paid back over 12 months at $1500 per month on a separate agreement. The payback will start on January 1, 2025.

At the time of signing the lease $7000 security deposit will be due. At the time of key pick up $3000 will be due.

[Michael K Gallagher]

@Jamal L. I have not done too many deals in your market, and I anticipate things are nuanced depending on the property type and condition and based on the personality of the owner....BUT it is common and customary in my world, which is usually retail/med office, for tenants to have at least some time of free rent during the buildout.

We usually structure things as follows, and you can change the number of days around but this is traditionally what we at least shoot for when we have a tenant we are repping.

- Lease commencement date is to be the 6/1/24 or when the landlord's work is complete. and we traditionally have penalties in place if the LL's work takes too long and pushes us past our initial timeline.

- then we typically have "rent commencement" or when you start paying rent, to be the earlier of either 180 days following lease commencement or when you are open for business.  

As I said these "number of days" can change and float as needed but in my world its not only reasonable but common and customary for TT's to have free rent during buildout.

for reference we are traditionally doing $500K - $800K build-outs in grocery anchored retail centers.  usually in the 3200 SF range

[Evan Polaski]

@Jamal L., it has been a while since I was working full time in the retail world, but what Michael outlined was typical when I was in the space.

The only reason I could see having to pay anything during your buildout would be if this is a high demand space.  If you are taking a space in a center with multiple vacancies, or even taking a space that has been sitting vacant for some time, I would imagine you have a strong hand in the negotiation.

Curious: are you working with a broker that represents you or are you negotiating directly with the landlord/landlord rep?

[Jamal L.]

Quote from @Evan Polaski:

@Jamal L., it has been a while since I was working full time in the retail world, but what Michael outlined was typical when I was in the space.

The only reason I could see having to pay anything during your buildout would be if this is a high demand space.  If you are taking a space in a center with multiple vacancies, or even taking a space that has been sitting vacant for some time, I would imagine you have a strong hand in the negotiation.

Curious: are you working with a broker that represents you or are you negotiating directly with the landlord/landlord rep?

@Evan Polaski @Michael

 Ahhhh-haaa, This particular space has been vacant for 2 years based on the agent. The initial price was 9k and the LL has dropped it considerably since it hasn't been leased. Given up an even lower price at 6k.  Im working with the agent on this and I gave two options to propose and she came back with the option where there is no free build out phase. 

If this were you and you knew the space was a great opportunity what would be your next step?

@Michael K Gallagher 

[Evan Polaski]

@Jamal L., out of curiosity, you mention working with an "agent".  Is this a true tenant rep that focuses on office (or are you looking at retail space)?  Regardless, in most markets there are tenant reps that only help business owners like you source and negotiate leases.  In my experiences, again from a while ago, while these individuals are technically licensed real estate agents, when I was leasing space for a landlord, I never referred to the tenant reps as agents.  That could just be the dialect used in the midwest where I am.

There is a big difference in industry knowledge between a residential agent that can legally do tenant rep work, and full time tenant reps.

As for next course of action: I tend to be a pretty straight forward guy.  So if you think the space is the best space available that fits your needs, in the grand scheme of business, you are not talking about a lot of money, so would sign the deal.  

But, I also find it a bit hard to believe that there isn't a space out there would fit your bill and could be worth talking to a couple other owners.