Benefits of Short & Long Commercial Leases

lease
When choosing between a short or long commercial lease, there are certain things to consider.  There are benefits of choosing either a short-term commercial lease or a long-term commercial lease for your business.

Benefits of Short Commercial Leases

A short commercial lease is generally less than 5 years. For companies who want to test their concepts and their markets, they will often find a short-term commercial lease the best.

According to Bloomberg, 80 percent of businesses fail in the first 18 months. Having a short-term lease will save business founders from the hook of unpaid rent if they go out of business. With short-term leases, entrepreneurs can experiment their new ventures with a low-risk rent.

Tenants can scale up or down without any difficulties. They can also move to a new location without significant loss in rent payment.  long-term tenants would have to transfer or sublease their lease to another tenant in order to relocate.

Benefits of Long-Term Commercial Leases

A long-term commercial lease is a lease that is more than 5 years. To control rent expenses over a long period, many businesses (especially retailers) negotiate leases in excess of 20 years. Here are additional benefits of signing a long commercial lease.

In a long-term commercial lease, you know how much your rent will increase annually, regardless of what happens in the market conditions. This helps businesses to make long term business plans without being concerned about market fluctuations.  With predictability comes stability. Stability helps your business. you will be around  for a while—enough to register your brand in the mind of your customers.  It  helps ease the inconvenience that your employees may experience if you were changing locations often.

With a long commercial lease, you have more bargaining power. There are certain rights that tenants who sign long commercial leases enjoy that those on short term leases do not have.  Landlords are more willing to give tenant improvement allowance like free rent or access to a larger space.

Both short commercial leases and long commercial leases have their advantages and disadvantages. The choice between short or long commercial leases depends on a number of factors.

Careful considerations must be made in examining the business objectives before signing the leases. In addition, you have to consider your company’s future as you enter into a long or short-term lease agreement. If you expect to be around for a long time, you may want to consider a long commercial lease, otherwise, it would be safe to sign a short commercial lease.

Related Article:  Pros and Cons to Short or Long Leases

 

Source:   Don Catalano  Re-Optimizer