Signing a lease with a mall for 7000sq ft. What should I look for and what can I negotiate.
Thanks for considering this post, now to the terms.

CAMs and utilities paid by outdoor mall. 

$1.10/sq ft/month

1 year lease

0% gross revenue share

Construction must have a pre- and post meeting

Must maintain roof, HVAC, plumbing, and other utilities associated with building, cannot sue for disruption of service as utilities paid by mall.

Would say boiler plate contract but providing details important to management.

$3M insurance policy, city, mall, and real estate firm must be notified by insurance provider.

Specific signage and build times, cannot work from 9 am - 9 pm Sun-Sun. 

Now to the business:

Retail entertainment, based in Tempe AZ.

Proforma from proof of concept in another state:

$20-$45k gross income per month

Profit margin to be expected at 20-35% or in another note $100k - $350k EBITDA factor in in rent, insurance, payroll, etc conservative would be $100k with inefficiency, improvements bringing it to $350k as this is a time sensitive business (scheduled appointments, limit to how many people can play at once) 

$65-$105k start up cost with variable in building material and labor.

2-3 month build time with permits. 1-2 month for no permits if we do simple build.

Business operations provided by consultants and familiar with management.

Management with marketing such as emails and phone numbers, familiar with advertising on radio, social media, website, and tv.

Business runs with 5 employees and 2 managers. Can work with 3 employees and 2 managers but 5 is shown to have longevity and provide coverage for unexpected.

Now to the fun stuff. What should we shoot for? Increase revenue share for 1-3 months buildout with lower rent? Try to push for 60 day lease termination without cause instead of 30 days? Fight for 3 year lease with option to renew and step up rent for no lease termination?

Any and all ideas welcome, open to other malls but this one is favorable in terms of demographic and placement in mall. Looking to build knowledge in lease negotiations.
[{"id": "gvcprj5", "text": "1 year lease? These malls are getting desperate...", "replies": [{"id": "gvctrt9", "text": "They actually offer month to month, these are considered speciality leasing", "replies": [{"id": "gvd1eru", "text": "You\u2019d be willing to do the buildout and absorb start-up costs if they decided to drop leasing to you in a month or a year?", "replies": [{"id": "gvd7en6", "text": "No i was just giving you more context as it seemed you were amazed they would do one year, thus I say they do month to month.\n\nTo clarify, we are looking not to have that happen as I try to mention in my last paragraph.", "replies": [{"id": "gvd7mla", "text": "I think it was someone else who made that comment, but I see what you were saying.", "replies": [{"id": "gvd89wd", "text": "I appreciate the heads up and you are correct. To make sure, we\u2019re you recommending something then?\n\nI don\u2019t they would care if it\u2019s a year or month to month as there\u2019s a clause where they can terminate the lease anytime without cause. It seems in AZ they use this rather than month to month, but I bet they are willing to do month to month for pop ups like a Halloween store or holiday seasonal chain.\n\nBoth month to month and year lease come with a 30 day termination clause at any time", "replies": [{"id": "gvd92m0", "text": "Interesting. No, I have no thoughts to share. I\u2019ve appraised retail many many years ago, but I am no longer an appraiser and have little to do with retail. When I have, I\u2019ve only had 5-10 year leases with renewal options, and never in malls. It feels like it\u2019s a wild west atmosphere these days.", "replies": [{"id": "gvd9eng", "text": "They are dying... but we thrive in these areas. Atleast in HI market. This will be our first mainland enterprise.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "gverrxp", "text": "Some times you have reduced rent for a short term month to month lease, but you need longer terms to make a business work. Maybe 3 or 5 year terms with several rights to renew", "replies": [{"id": "gvesoh9", "text": "Agreed, just have to fight for it.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gvctvbn", "text": "Should we be shooting for something different? Or you just amazed by the commercial property terms haha", "replies": [{"id": "gvcwzhu", "text": "Really depends on the business. Most landlords and property owners want a longer lease - the longer the better. In my 7 years of being a broker in a medium size city I've never negotiated shorter than a 2 or 3 year lease. Given, as a broker there is little incentive for me to chase small year long deals. Malls are in the unique position of being double fucked by the pandemic and the death of brick and mortar retail so they are mostly hemorrhaging money. The fact they're willing to do month to month leases is a bad sign for the mall business.", "replies": [{"id": "gvcxh50", "text": "You are telling me haha, we wouldn\u2019t be pursuing this unless it made money. We have 2 in Hawaii that produce. But we have a revenue share at $0.25 a sq/ft\n\nNot sure how the brokers are being compensated for the leases, would say AZ and HI people have a different level of professionalism. With HI being more open and fast with communication.", "replies": [{"id": "gvd0070", "text": "Curious- What type of business/niche retail is it?", "replies": [{"id": "gvd07rm", "text": "Retail entertainment", "replies": [{"id": "gvd1sgv", "text": "Can you be more specific? Reddit NDA applies of course", "replies": [{"id": "gvd787c", "text": "Ya i got you, just think family fun center, where you pay to play on a field or track. \n\nHard to describe it without showing you our current business.", "replies": [{"id": "gvdbvfr", "text": "I just want to be really clear here before I give my word on what to ask for. You mean to tell me they want $7,700 for an entire year for 7000sq ft?", "replies": [{"id": "gvdc26b", "text": "Haha no, I can make that edit, it\u2019s per month. I assumed we would all think monthly rent. I\u2019ll edit it now", "replies": [{"id": "gvde986", "text": "Alright that put you at about $13.20/sqft. (($7,700x12)/7000sqft)) which is actually pretty reasonable. \nIf you have a solid business plan that is putting up those kind of numbers, I\u2019d honestly lock in a 3 year lease, ask for 50k of tenant improvements/allowance and 3 months free rent while you\u2019re building. Cap the HVAC &amp; roof costs at X until it\u2019s landlords responsibility. \nI don\u2019t see the point in putting that much money into a build out for a single year lease so shoot for the moon see what they say.", "replies": [{"id": "gvdqrk6", "text": "This is a good approach. \n\nTo give feedback, I think we will implement this as a 1 year lease with contract to have a 3 year with similar terms.\n\nI am coming at this with a Low equity position and as a manager so not key stakeholder but definitely listened too.", "replies": [], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}, {"id": "gve62b9", "text": "so folks pay by the hour? then you do a bunch of birthday parties and stuff too? \n\ndo you sell food and beverage or anything else to make money?\n\narcade? trampoline park? along those lines?\n\nhow do you stay busy during the week?", "replies": [{"id": "gve6wjk", "text": "All good questions, we can talk more in the DM really it just takes management and marketing. So we have found. But is niche and sometimes can flop if not properly done.\n\nTrust though, we wouldn\u2019t open a third one in another state if we didn\u2019t believe there would be a high chance for profit. Even if it\u2019s just $100k-$350k but it\u2019s all about compounding revenue. Then leveraging debt to buy assets", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gvcrim6", "text": "Are you the landlord or the tenant?  \nWhen you say \"paid by mall\" do you mean the landlord?", "replies": [{"id": "gvctpq6", "text": "I will clarify, I am the tenant. The mall is the landlord using a real estate company to represent them.\n\nThe landlord will pay for CAMs and utilities. Not the tenant", "replies": [{"id": "gvd3e3h", "text": "Yea these terms are hilarious. Sounds like a solid business based on your post. If you are confident in your strategy long-term, I would suggest going for the three years and offer .5 per SF and see how far you can pull them down on the rate.", "replies": [{"id": "gvd71uc", "text": "This is an idea, we would like no rent or lowered rent for the buildout. Was hoping others had experience in this. \n\nI would recommend if you get into malls to get a longer period than 30 days because they will cut you fast when they have a better tenant. We have done 2 moves in the last 3 years between 2 locations in HI.", "replies": [{"id": "gve7dgu", "text": "I think rather than signing a longer lease, I would ask them to add five 1 year options to continue to the lease at a specified fixed rate.  That way you get the benefit of longer term security, but aren't on the hook for the longer lease unless you decide to.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gvd0dfh", "text": "Phoenix broker here. \n\nTypically I get a warranty period or a cap on expenses on the HVAC. With summer coming up in AZ you will need it.  Some insurance companies here will have hvac riders but you have to specifically ask them.", "replies": [{"id": "gvd7io6", "text": "This is what I love. Yes AZ gets hot. Best info so far.", "replies": [{"id": "gvdkbko", "text": "Landlord should be responsible for replacement of HVAC while tenant is responsible for maintenance and upkeep capped at (negotiable) $2K annually.", "replies": [{"id": "gvdpo29", "text": "This is good, out of all the info, this thread was most helpful. From both comments.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gvd3jgs", "text": "&gt;$1.10/sq ft\n\nO_O is this a typo or monthly?", "replies": [{"id": "gvd67me", "text": "I was wondering that too / if this is the new rate for malls I\u2019m going to see about an idea I have for using up old sears spaces", "replies": [{"id": "gvd6tup", "text": "Ehhh you and everyone else, those are mostly for 3-7 year leases. Not to mention you would get killed on maintenance. We found that many of these places ripped out their HVAC or special systems. Thus you have to provide your own.", "replies": [], "depth": 3}], "depth": 2}, {"id": "gvd6oj4", "text": "This is the rate my friends, they either do revenue share or they sq ft price or a combination. \n\nI\u2019m glad I can educate you guys haha", "replies": [{"id": "gvd7ch6", "text": "Wow!!! The only reasonable explanation is that they are expecting your company to either bring a lot of traffic to the death mall or is better than nothing while they redevelop. Here in Miami, we have a similar mall called \"Sunset Mall\" which has also a large arcade. They have been trying to redevelop it to a mix-use (retail-office-multifamily) for years. I would not be surprised if the theater and the arcade are being offered such rates.", "replies": [{"id": "gvd7y7b", "text": "I definitely think the bargaining power for those locations are greater and get favorable figures.\n\nWe do show the foot traffic we bring in while in HI, these get ears to listen.\n\nOverall, wanted to see the nuances and small tips and tricks. Would it be hard to make a broker give up a portion of rent while a place is being built out? Or is there any parts of the lease that are usually negotiable? Revenue share is what we like to play with but the AZ are slow when communicating to us.", "replies": [{"id": "gvda2mj", "text": "Well, everything is negotiable in a lease and I think you are getting a good deal. I think the trick is in understanding the motivation of the landlord to see what would stick. The fact that they were initially interested in a month to month and then they told you that they would be interested in a 1 yr lease, tells me that their plan is to demolish and develop. So, you could negotiate probably a month or two, the worst it could happen is a no. I also don't think they have many tenants looking to fill the space.", "replies": [{"id": "gvdagdw", "text": "How can we find the motivation of the landlord when communicating with the brokers/leasing specialist ?\n\nI know I am digging here haha", "replies": [{"id": "gvdcz68", "text": "LOL, well I would start by reading journals and digging about the property. Usually, there should be news bits or articles. It is up to you with the information to try to get a picture. This of course is easier when you have a local commercial broker helping you.\n\nAny negotiation is a poker game. They don't know your intention (unless it happens that the broker is a Redditor and recognized the deal, which is unlikely but not impossible.) Sometimes asking the right questions and straight asking what are their plans is fair and they will spill the beans.", "replies": [{"id": "gvdqff0", "text": "This is helpful.\n\nSounds like a phone call will be appropriate.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "gvdjwpu", "text": "On the west coast, specifically CA &amp; AZ it is typical to quote rental rates per month.", "replies": [{"id": "gvdpt8z", "text": "Ya this was an assumption that it was monthly rent, edited the per month part. Just an oversight.\n\nIn HI it\u2019s looked at as monthly too, where is it looked at as yearly?", "replies": [{"id": "gve45py", "text": "East coast where I am in suburban DC, it's annual but that means that I have to do arithmetic to figure out monthly.  I like your way better, less arithmetic.", "replies": [{"id": "gve4crw", "text": "That west coast terms haha. Thanks for the response.", "replies": [], "depth": 6}], "depth": 5}, {"id": "gw3d9m1", "text": "All of south and all of North too. I had never heard of a concept called monthly rent until this post:", "replies": [{"id": "gw3hywr", "text": "Glad I can show you something new.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gvddklt", "text": "He means $13.20 a foot.  The $1.10 is per month, not year.", "replies": [{"id": "gvdg3u9", "text": "Yes, he updated the post. Sometimes anchors can get such low rates. I have seen anchor stores with leases as low as $3 sq ft/ yr. They do it because the traffic.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gvd7oy9", "text": "After thinking about this for a moment I can only see one scenario where these lease terms would be acceptable to the mall. \n\nThey are running into a co-tenancy or occupancy clause on a major tenant. (Likely occupancy) \n\nYou might be able to push them a little more but these terms seem super reasonable and likely a major loss for the LL in any other scenario.", "replies": [{"id": "gvd912q", "text": "I appreciate this input. It\u2019s all business here. We have seen different terms in malls in the surrounding area but this one seems to have the right demo, structure, and terms we are looking for.\n\nAlways nice to know what we can work with but not trying to step on toes.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gvdg8y4", "text": "I dont mean this rudely but is there any particular reason why you don't get an experienced agent to be your tenant rep? It doesn't cost you anything and they will know best how to negotiate in your market.", "replies": [{"id": "gvdiyaa", "text": "I'm not saying a good tenant rep isn't worth the pay but they do get paid and that pay comes out of the deal and everyone knows it will come out of the deal before the deal is signed so the tenant does indeed pay for their rep no matter what the tenant rep marketing literature says.", "replies": [{"id": "gvdknxt", "text": "Perhaps not.  Landlord broker may get 4-5% if there is no tenant rep as opposed to 3 each.  Especially if the mall is not doing the deal themselves and using their own broker.  You do not save all that much doing the deal yourself.  It is better to use a broker or at least hire an attorney to negotiate the lease.", "replies": [{"id": "gvdqauq", "text": "Valid point, I think we are coming at this as \u201cexperienced\u201d because the management team has signed multiple deals before.\n\nIm just a manager that has moved out to AZ to open the new location and I earn equity managing it, thus this bring me to my lack of knowledge.\n\nPast experience was a commercial banker that financier SBA, USDA, and CRE loans.\n\nI know I copied and pasted this 3 times. But the overall point is get a lawyer to review or a professional to assist. The fee May be worth it in the long run as we hope to open more of these.", "replies": [], "depth": 4}], "depth": 3}, {"id": "gvdq6xq", "text": "Valid point, I think we are coming at this as \u201cexperienced\u201d because the management team has signed multiple deals before.\n\nIm just a manager that has moved out to AZ to open the new location and I earn equity managing it, thus this bring me to my lack of knowledge.\n\nPast experience was a commercial banker that financier SBA, USDA, and CRE loans.", "replies": [], "depth": 3}, {"id": "gvdz0sg", "text": "I have landlord agreements where I get 6% whether its co-broked or not. If tenant has an agent, we each get 3%. If not, I get 6%. Commission does not factor at all into the Landlord's negotiations. And if not usted, good negotiating up front can save you a whole lot more on the back end.\n\nJust saying. If you're asking Reddit, you're better off asking a local professional. Best of luck to you and your business!", "replies": [], "depth": 3}], "depth": 2}, {"id": "gvdq540", "text": "Valid point, I think we are coming at this as \u201cexperienced\u201d because the management team has signed multiple deals before. \n\nIm just a manager that has moved out to AZ to open the new location and I earn equity managing it, thus this bring me to my lack of knowledge. \n\nPast experience was a commercial banker that financier SBA, USDA, and CRE loans.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gvdx3xy", "text": "When did this become the \u201cfree professional advice sub\u201d?", "replies": [{"id": "gvdziwu", "text": "... umm what is it supposed to be used for instead of building community by sharing knowledge? \n\nI mean if you didn\u2019t find any value on what I wrote then that\u2019s your loss as there\u2019s multiple people that commented and learned something that they didn\u2019t know before.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gve6qfe", "text": "I didn't see it in your terms, but don't let them convince you to add a personal guarantee.  I've seen many of business owners get screwed by leases with personal guarantees when a business goes bad.", "replies": [{"id": "gveihmj", "text": "This is good, no personal guarantee only an LLC made with multiple members/managers.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gveqgoc", "text": "It\u2019s very unusual for a tenant to be responsible for the roof in a mall. Roof maintenance is typically part of CAM. Is there a clear boundary where your responsibility ends?\n\nI\u2019d also ask them to provide you professional verification that the HVAC is in good working order before you take possession.\n\nAre there any relocation options? I\u2019ve seen many specialty tenants get the boot after sinking thousands of dollars into a buildout. If they do get a perm deal for the current space, can they relocate you at LL expense?", "replies": [{"id": "gverqnq", "text": "This is good, I wish I had these options. \n\nThank you, honestly glad I posted this. There\u2019s much more to ask for than just the price.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gvfudrj", "text": "If you do rev rent make sure its scoped out properly, particularly with multiple locations.  If you do any online sales (gift cards etc) spell out how that is handled.  Ive heard some awful headaches with mall landlords trying to attach to rev that is outside the location", "replies": [{"id": "gvg3z0u", "text": "This is a problem, we use a identifier to show how the funds are processed.", "replies": [], "depth": 2}], "depth": 1}]