How to negotiate a short term lease with an option to renew for longer term?
Hi,

I've heard that typically a commercial space in a mall requires a lease of 3 to 5 years with an option to renew after that. I wonder how to negotiate it down to 1 year with an option to renew for another 5 years. The reason for a very short 1st year is because the business is new. It needs to complete POC, prove of concept, for the 1st year. If it's viable, it makes sense to renew for another 5 years. I don't mind abandoning the improvement costs. Just don't want to be stuck with the 3 to 5 year term.

I'm talking about a blank space around 2000-3000 sqft. No special build up requirements (like restaurants, laundromat, etc). It only needs HVAC to make the temperature comfortable and parking. It could be a retail, office, or industrial space. My business will bring its own traffic. It doesn't need to rely on other anchor tenants.

How to negotiate a short term lease in that scenario? Please share your thoughts/tips. Thanks.
[{"id": "j09ay1i", "text": "Find an existing tenant with short term left on their lease and negotiate a sublease or to take over their existing lease.", "replies": [{"id": "j09exsg", "text": "That's a great idea! How to find such tenants? Normally the for rent sign is on the vacant space. I've never seen the sign that say \"almost ready for rent\" :-)", "replies": [], "depth": 2}], "depth": 1}, {"id": "j0aluq6", "text": "I would suggest call around, and asks the landlord or listing agent you only sign one year. 90% will say no but someone out there will do. Your rent maybe a bit higher since it a shorter term lease, and dont expect any TI or abated rent on this. Good luck!", "replies": [{"id": "j0byugx", "text": "Thanks for the tips and what to expect.", "replies": [], "depth": 2}], "depth": 1}, {"id": "j0apria", "text": "Be up front that you want a short term lease. More landlords are going to be amenable to new structures and get into leases they previously ran away from. The disadvantage is the 5 leases really benefit the tenant and give stability for your investment.  I think I would request a 5 year with an out clause in 12 months or go find a space seeking pop ups and try your proof of concept there. Trying things out i\u2019d usually a bad sign though.", "replies": [{"id": "j0bz912", "text": "&gt;I would request a 5 year with an out clause in 12 months \n\nThat sounds excellent but wouldn't that the same thing as signing a 12 month lease with the option to renew for another 4 years (my original post)? To be honest, the way you suggested sounds better somehow.", "replies": [{"id": "j0cah4o", "text": "They\u2019re not the same thing but I can see how you\u2019re reading it. There are reasons it\u2019s beneficial to both sides.", "replies": [{"id": "j0cg0ao", "text": "Ok I'll try that. Thank you for this excellent idea :-)", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j0bun37", "text": "Excellent comment Billy ball. I think I would go in asking for a 3 to 5 year lease, with 12 month out clause - offer six months penalty if you exit lease after 12 months.   Something like this could be considered fair to both parties.", "replies": [{"id": "j0bzmkm", "text": "&gt;I would go in asking for a 3 to 5 year lease, with 12 month out clause - offer six months penalty if you exit lease after 12 months.\n\nThanks for another agreement with Billy's idea. Yes I must admit that it sounds much better than my original proposal and yields the same results :-) However wouldn't the landlord see through that?", "replies": [{"id": "j0c1hj1", "text": "I\u2019m assuming you\u2019re looking for sub-prime space and won\u2019t be asking for TI. I\u2019m familiar with that, some vacant commercial space is hard to lease up. If a landlord can get guaranteed market rent for 1 year and a 6 months rent as a penalty if you exercise the out clause on your 3 to 5 year lease - that\u2019s a reasonable deal for a landlord with hard to rent space.", "replies": [{"id": "j0cgbfm", "text": "&gt;I\u2019m assuming you\u2019re looking for sub-prime space and won\u2019t be asking for TI\n\nCorrect. Thanks for the explanation on why the longer lease with 12 month out clause is better. Appreciate it.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]