How do I negotiate on a lease?

Fitness Founders Series

A continuation of articles from our Fitness Founders series: Mehdi Elaichouni of Carpe Diem Jiu Jitsu Singapore shares his first-hand experiences of personally navigating challenges along the road to success. He highlights key learnings and actionable takeaways to help new fitness businesses grow and succeed.

Congratulations on making it to this step! It’s time to lock down a space for your dream business. When it comes to lease negotiation, it all comes down to price. To put things simply, price is determined by supply and demand which means everything you do at this stage is to equip you with information and assess where you stand with the landlord.

Skip ahead to:

• 1. Find out where you stand
• 2. Do your research
• 3. During the viewing

1. Find out where you stand

If you are going after a prime location, demand will be high and that means your negotiating power will be limited. From a lifetime of negotiating home and commercial leases, I can safely say that rental rates are always negotiable. The difference between the original asking price and what the landlord is willing to accept can be quite significant, so it’s always worth going through a negotiation process before making an offer. Don’t let the location being competitive put you off negotiating – focus on what you bring to the table, and why your business will be the best choice for the space.

2. Do your research

Since rent prices are determined by supply and demand, the first thing to do is research rental prices and trends in that area. Look for past reports and transaction prices. COVID has turned the last two years into a tenant’s market but rent is not always determined by environmental factors – a landlord with a brand new space in an area with zero foot traffic could still be willing to drop his price even in a booming economy.

Before you make it to an actual viewing, you should also try to find out when the unit was last rented out. If the place has been vacant for years (vs months or weeks) it could be that the landlord is either not in a rush, or is struggling to find a tenant. This is easily done by a quick search of the address and see what results show up.

3. During the viewing

Property viewings are a great time for you to assess the physical location, to give you a real feel of whether the location is suitable. It’s also a great time for information gathering that can help you later on in the negotiation process. These are a few things I like to do during property viewings.

Stay neutral

Don’t show how much you love the space as this could hurt you in negotiating. Also be mindful of your remarks, body language, and facial expressions.

Build a rapport with the viewing agent

Agents will always want to close the deal, so getting them on your side will help you later. On top of asking questions about the space, now is a good time to suss out how quickly the landlord wants it rented out. I also like to drop hints to communicate to the agent that I am a reliable and trouble free tenant. 

Take photos

Take photos of the space, including spots that may need repairs or replacements: This will come in handy when you’re deciding which space to take, and during rent negotiation.

Ask for other benefits

If the landlord is not willing to budge much or at all on the rent, you can still try to ask for non-monetary benefits that could help your operations. This could be requesting for repairs or replacements, including utilities, staff benefits, etc.

4. Before you sign

Once you’ve selected your ideal space and negotiated on an ideal lease structure, you will usually submit a Letter of Intent to the landlord. Don’t rush to sign off on the Tenancy Agreement just yet – you need to bring in a contractor to assess the site. This step will help you avoid taking on responsibility for big costs, such as a dying HVAC unit, and push back on the landlord to make repairs before handing over the unit.

With your contractor on site, you should also brief them on your construction requirements to make sure that all the renovation and alterations to the space can be done within budget. The last thing you want is to have to make big compromises or realize, after signing the Tenancy Agreement, that what you want cannot be done.

In summary

Lease negotiation can be daunting but give yourself enough time and set up multiple options. You will probably not get everything you want, but will probably get most of what you need.