How to Negotiate a Lower Rent

Posted by: Alan Bernier

3 Ways to Negotiate Lower Rent

Besides claiming that you are a young, growing, and cash strapped business that the landlord should
help at the goodness of his heart, here are a few methods that can help.

1. Fair Market Value: The first one was to discuss the other spaces you are looking at using the
real financial terms with the broker and or the landlord. Once they realize you might go elsewhere,
they usually will attempt to cut to the chase and put their best foot forward.

2. Pay as you Grow: The next technique is to attempt to phase your growth into the space. For example
if the space is 2,500 square feet, you begin with the justification that you need 1,500 square feet now,
but will need the 2,500 square feet a year from now. If you are signing a 3-5 year lease, the landlord
should be willing to let you pay as you go which will strongly help the economics of what you are trying
to accomplish. Below is a real example to see the power of this type of negotiating:

Direct Approach   
Space    2,000 square feet
Rent    $2.00 per square foot/month
Calculation    $4,000 per month*36 month term
Total Obligation    $144,000


Phased Approach    Paying on 1500 square feet for 6 months before moving to full 2,000 square feet
Space    2,000 square feet
Rent    $2.00 per square foot/month
Calculation    1500*$2/sqft*6months+2000*$2/sqft*30months
Total Obligation    $138,000

This is an average rent over the term of $1.91 and is probably an easier method then asking the landlord
to cut their rental rate $.10.

3. All the Extras: Negotiate the rent as far as the landlord will move and then move to concessions like free
rent or tenant improvements.
 

Last updated: 09.15.2008 10:04 AM