Discount proposed rate for a 10 yr lease over a 5 yr

[Ben S.]

I have a large warehouse space that a company is looking at.  They sent an RFP for rates for a 5, 7, and 10 year lease.  It is a well known international company and I would love the security of having a 10 year lease signed with them, but am not sure how much that is worth to me.  Is there another way to put the proposal together to make the 10 year option more appealing to them other than decreasing the rent$/sf?

[Joel Owens]

Basically you front load the benefit so you can have more cash flow and return in the future and higher resale on income versus giving them a straight lower rent for getting the 10 year term.

Get a commercial attorney to help negotiate options that you find favorable. The tenant likely has an attorney on call so you should have one in your corner as well. How hard you negotiate depends on what other options the tenant has for similar space in the area and how many of these types of tenants come along for space like yours. If tenants are hard to come by and spaces are plentiful in the area for site selections then you tend to have less leverage in negotiating.