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Deciding between a short-term and long-term lease is a major decision. Each choice carries its own benefits and drawbacks.
Long-term leases on stores are common in the real estate arena. Property owners try to work out leases of 20 years or more, primarily to control their expenses in the long run. Short-term leases are ending up being more common as sellers look to test merchants and markets prior to making a longer commitment.
A real estate attorney for store leases in Manhattan will be able to help you work through the decision-making process as to what works best for your unique situation.
A property owner may work out a long-term store lease in Manhattan for a variety of reasons. Most importantly, it provides the ability to predict future rental income, which is often the most significant month-to-month expense for tenants. A long-term lease also gives the renter dependability to stay in the same place long enough to develop itself in the neighborhood and build a routine client base.
The main downside to a long-term lease is the binding dedication required. If a retailer locates itself in an area that loses a great deal of customer traffic, it’s stuck until the lease ends. Some merchants alleviate this threat by stipulating that it can break the lease in particular situations. A buyout provision also produces an escape route, permitting a retailer to terminate the lease by making an affordable balloon payment at a certain point in the lease.
Short-term leases are helpful if a retailer wants to experiment in certain markets. It’s important to estimate the expense of utilities, upkeep, commercial rental insurance fees, and possible rent increases. Hopefully, rent will be consistent, given that you’ll likely sign a lease for a fixed-term at a specific amount. Check out the fine print, and be aware of the conditions under which a rate hike could occur.
Short-term leases have possible downsides on retailers. The expense of building out a store and filling it with inventory can be really high and is not quickly amortized over a short-term lease. The marketplace characteristics of a location can change quickly as well.
A store lease in Manhattan might have a longer rental term when renewing a lease after the initial deal was signed. Landlords choose long-term store lease commitments for the simple reason that they don’t have to worry about the commercial property sitting empty anytime in the near future.
It’s not easy deciding between 3 years and 15+ years. Hopeful store lessees need to make the decision that is right for him or her.