If you’re considering leasing office space there are many factors that Tenants need to think about throughout the entire process. Everywhere from location, one of the most important decisions (so pretty much where you want to go to work every day), to evaluating your company financials to see how much cash you will need up front for securitization before signing those thickly stapled packets of paperwork, more commonly referred to as your Standard Office Lease.
A common occurrence is that Tenants, especially younger and typically start-up businesses, are required to provide an increased security deposit, generally because the Landlord understands the risk and implications that may come with leasing to a company with a short operating history and without reasonable time to profit. By contrast, for older more established businesses with a strong financial standing the Landlord may only require the standard one-month security whereas those with poor financial history or a new start-up may have to provide up to 6-9 months of a security deposit to assist the Landlord in covering their initial out of pocket costs.
What most Tenants do not know is that this is something a sophisticated Landlord in today’s market may be willing to negotiate with you. This is where a savvy tenant rep broker would definitely come in handy. Since the collection of a large up-front security deposit usually kills a deal for most Tenants, a couple creative negotiation strategies we have used (as a way for most start-ups to eventually sign a long term lease) is through the use of a Letter of Credit or Personal Guarantee. With an increased security deposit there are also ways to negotiate to minimize the hefty lump by reducing the total security throughout the Lease term by applying it as a credit towards rent. Minimizing security deposits are just one of the many obstacles Tenants will have to tackle with their prospective Landlord, why not make sure you have an experienced tenant representation broker on your team to get you to the finish line!