Shop Talk: Practical answers for tough business questions
Question: My lease is up for renewal next month. Originally I only signed a three-year lease because I was cautious about how things would go. Now that our sales are good and fairly stable and I like the location, I would like to sign a longer lease. My landlord told me last week she would not raise the price per square foot, which is great by me! But, how long a lease should I ask for now?
Answer: Why not ask for another three-year lease with two additional three-year options? That way you are not locked in for more than three years, but you have some protection from having to move for the next nine years, if that is what you choose. Most times when landlords offer a lease with options, they build in some kind of escalation clause or inflation coverage tied to the CPI (Consumer Price Index) or other index, to lessen their risk. If you are not savvy about lease clauses, I would go back to the broker who helped you negotiate your lease three years ago or check if you have a local SCORE office, which offers free consultations to businesses.
First published in Vol. 28 No. 3 of Retailing Insight. © 2014 Continuity Publishing Inc. All rights reserved.