How Long are Most Commercial Leases?

July, 5th, 2022

How Long are Most Commercial Leases? – Summit Properties

How long should a commercial lease be? That’s a crucial question for business owners when negotiating commercial lease length and other terms. Given that seasoned property owners often set terms that favours their business interests, it’s important for business owners to understand all aspects of a commercial lease.

Average Commercial Lease Lengths

When business and property owners discuss commercial lease length, that element depends on wide-reaching factors. Ontario’s commercial lease length typically ranges between one and ten years.

Startups and businesses requiring minimal space often lean toward shorter terms. Large office and retail leases generally run 5-10 years or longer. And organizations that wish to develop properties usually seek a commercial lease length of 20 to 99 years. These are reasons business leaders settle on short- or long-term leases.

Benefits of Short-Term Commercial Lease Length

The key benefits for tenants who sign relatively short-term leases involve financial protections and flexibility. Startup companies are more prone to failure, and partners can avoid long-term financial liability. Shorter leases also allow growing companies to seek larger spaces or advantageous locations when needed.

Benefits of Long-Term Commercial Lease Length

Maintaining a stable footprint supports economic growth. Long-term leases also lock-in terms, which helps avoid the increased overhead associated with renegotiating a lease.

Typical commercial real estate lease term lengths are often associated with the type of business, space, and long-term goals of the company and property owner. Therefore, deciding the length of a commercial lease remains a matter of thoughtful due diligence and skillful negotiation.

Negotiating Lease Terms

Every aspect of a lease for a commercial property can be up for negotiation. Unlike residential property owners who rely on standardized clauses and plug in the numbers, commercial landlords often prefer specialization in their lease agreements. For instance, a light-manufacturing outfit and a cybersecurity firm have vastly different operations and impacts. Commercial landlords must account for the differences and integrate responsibilities and prohibitions into the formal agreement.  

Negotiating Renewal Terms in a Commercial Lease

It’s generally a good strategy to incorporate renewal terms and costs on short and mid-length leases. This helps companies plan ahead should they decide to renew. Longer leases typically bake in rent increases. But it’s not impossible to include exit strategies should an organization find other, more lucrative opportunities. 

Additional Lease Considerations for Business Owners

Before signing a commercial lease, it’s imperative to conduct thorough due diligence. Conduct a walkthrough during hours of operations to ensure your company is a suitable fit, and understand precisely what is included in the rent and extraneous costs your company incurs. The cost of commercial space typically ranks among an organization’s more significant expenses. Make sure you are getting your needs met.

Elevate Your Business with Summit Properties

A commercial lease length remains one of the crucial elements of enjoying a secure physical footprint. Working with a commercial lease expert can be an invaluable resource if you are considering office, manufacturing, or retail space. As an industry-leading organization, Summit Properties works diligently to ensure all parties clearly understand their rights and obligations and agree on a commercial lease length that works. If you are considering renting commercial space, contact Summit Properties today.