Over the past several years, vacancy rates in commercial spaces in many parts of the country were near 10%.  If you were to sign a lease at that time, you could get away with asking for pretty much anything you want; and the landlord, for fear of missing out on a quality tenant, would likely give you what you wanted without hesitation.

And though vacancy rates are now closer to 6% in many parts of the US, there are still great deals to be had…YOU just have to be willing to ask for a better deal.

I would guess that landlords are still a couple years away from being able to start charging pre-recession rent on commercial space.  Until then, your credit worthiness will be the driving factor in most deals.  Landlords will bend over backwards sometimes just to keep space filled.

So if you have either good credit or a strong rent history, it is still a good time to negotiate or re-negotiate your lease and get a much better deal than you would have just a few years ago.  A landlord would rather give you a good deal than have you not sign the lease.

You can ask for any number of concessions: reduced rent, free months, a shorter lease, a termination clause, generous tenant improvement packages, caps on common area maintenance (CAM), etc.

INSTEAD of me telling you stories about the clients we’ve helped negotiate their lease, I thought it would be better to hear YOUR story.

What kind of deal did you get?  Did you have to negotiate intensely or did the landlord pretty much give you what you wanted?  Or did you get screwed?  Share your story in the comment area below.

    52 replies to "Negotiating the Lease on Your Gym"

    • We recently renewed our lease on a 28,000 sq ft facility. Sandy Hall with Taft Construction helped us renegotiate the lease. The lease was effectively reduced by $10,000 per month, or by more than 1/4. We also will be able to borrow up to $200,000 at 4% from the landlord for equipment or facility upgrades within the next 24 months. To get this kind of deal, you may need to be willing to relocate, as we were, in order to have the most leverage. We had already negotiated an LOI with a nearby landlord. However, bottom line is that you need a third party professional to do the negotiations and remove yourself from the communication with your landlord. Good luck.

      • I couldn’t agree more. I’ve spoken to several clients who got into a deal they didn’t completely understand. Having a third party, legal or otherwise, on your side to identify issues with a lease or to negotiate with the landlord is incredibly valuable.

    • Jeff

      We’ve been in our location for going on 8 years. While we got a great deal when we started out things didn’t go as well as we had planned when the crunch hit. Rather than getting into rent trouble we approached the landlord and explained the situation. He allowed us to stay without hassle for several months without rent while we overcame the recession at which time the past rent was added to our monthly payments. Moral of the story is landlords will work with you in this economy.

      • Even if you aren’t necessarily struggling, but really want to do better, you should discuss with your landlord. Sometimes he/she will almost be like your investor. If you don’t have marketing dollars or capital improvement dollars, chances are good that you’re missing out on a lot of ROI from missed traffic and losing existing clients. Getting your landlord to free up half a month’s rent to put toward New Years marketing or improvements would more than make up for itself. Your landlord will obviously want the money back, but most landlords would rather do this, than fear losing you if you begin struggling. You have one business, one primary source of revenue. Your landlord has multiple tenants and possibly multiple buildings and will be okay to take one step back to make one step forward by helping you become more successful. It’s always worth communicating with your landlord about this type of thing.

    • As the business owner and the building owner I see both sides, my tenants recieve the same service my clients recieve! so NO burned out lightbulbs, poor working AC, or shabby landscaping.
      A long term deal is worth a rent discount also, I like 5yr terms.

      • I’ve found it harder to find rent discounts, even in a slow economy, simply because a landlord doesn’t want to devalue the average cost per square foot among the units. If they cut you a deal, they know they’ll likely have to cut another deal. It’s often in a landlord’s best interest (as you already know Bill) to give a month or two away, but still charge full price rent after that, than give a discount every month. But it’s all marketing right? Maybe you advertise your units 20% higher than other comparable buildings, allowing yourself 20% wiggle room to make your tenant feel they got a great deal. Also, I’m sure your tenants love that you take care of them. Many do not have the same approach to customer service as you do.

    • Ken

      We rented an unfinished space and were able to negotiate the first 2 months free, landlord paid for the build-out, and he gave us a $3,000 flooring allowance. We’re in a 2,000 sq. ft space and it was a 5 year lease.

      We’re now at 3 years in this space and need more room. Looking back we got a good deal on getting started, but locking into 5 years has hurt our growth.

      • That’s a good problem to have! You can always look for a nearby short-term overflow space. Perhaps a unit in your building has been vacant for a year. Offer to rent it month to month or in 6 month chunks for a discount. Don’t worry about a buildout. Just put your ropes and bands and balls etc and run group training or bootcamps. You don’t need a bathroom, you don’t need flooring, hell you might not even need utilities. You just need space to get down and dirty. As long as it’s within a block or two of where you are now, it could work out nicely. I’ve seen this type of arrangement more than once. It might be worth looking!

    • John

      Always have an escape clause. If you grow faster than expected or get hit harder by the recession. Once the commercial real estate firm has your initials its too late to change this. Usually a declining amount of guarantee works, in a 5 year lease say after 2 years – 6 month buyout, after 3 years – months etc.

      • That’s a great idea John. There are so many ways to get creative in lease negotiations. Landlords don’t get upset when you ask. In fact, they expect it.

    • I signed a deal on 10,000 additional sq ft in April of 2011 previously had 30,000 sq ft the deal was to resign 3 years on current 30,000 picked up additional 10,000 for taxes & insurance on the 10,000 under 1,000 per month the negotiating info I had was (the building owner was using it for his own storage and he has other buildings that are vacant in the area)& I knew he wanted to re-up on my current space. My first offer was I wanted it free never hurts to ask still made out pretty good 🙂

      • Again, another creative way to get space at a great price. Always be on the lookout for unique opportunities. And even if you’ve not yet outgrown your space, it’s still always good to plant the seed with your landlord that if they have space that’s difficult to rent out or if one of your next-door neighbors vacate their space, or any other unique situations, express interest to have him/her contact you to discuss options.

    • Im playing the waiting game…still! Huge surplus of great spaces are available but noone willing to work with me other than build out, and honestly I need no build out. I live in a tourist town and even though the down time has started, far too many landlords not willing to work with me. No worries as I have no overhead at this point , I want a space BUT will get one when the deal is right.

      • Continue to be diligent. Eventually one of them will soften up and give you what you want. In the meantime, I would rathole as much cash as possible and build your EFT. Also, get with a commercial realtor to find out if they know of any space that you might not have seen yet. They often have unique relationships with landlords and can help work a deal for you as well.

    • Last year I was due to extend my lease and managed to do so for almost half my previous rate with a free month and receiving back a portion of my security deposit. The key to the negotiation was coming in armed with a thorough understanding of the market. I researched other spaces, found out vacancy rates of my landlord and made some fairly strong bluffs regarding my willingness and even desire to move and that only the most competitive deal would keep me in their building. Landlords don’t like vacancy, so you can get under market deals if you do your homework and negotiate hard.

      • Sometimes bluffs work, sometimes they don’t. Right now many landlords are hungry for good tenants…giving you the upper hand in negotiations and re-negotiations, and when bluffing. You didn’t want to leave your space, you just wanted the best deal. You have to understand the details surrounding the situation, as you stated, before you begin negotiations. If you know the landlord has plenty of other vacancies and is having difficulty renting, that’s in your favor. If you’ve been a good tenant, that’s in your favor. If you know the building next door has lower rates, that’s in your favor. BUT, as in all bluffs, you had better be prepared for a counter bluff, or at worst an ultimatum. An exit plan is always necessary. Looks like it worked out well for you Mr. Big Stuff!

      • The key to any bluff is to know how far you are willing to take it. In my case, I was willing to move and did have good alternatives, just not quite as good as I let on. Also, I started the process early! So I had time to evaluate and react to their position. At one point, I went several months without taking their calls because I told them they were way off and I was just going to commit to finding another place. That really made them nervous and when I came back to the table, they made some significant concessions. If I had waited to start the negotiations too late, these tactics would not have worked nearly as well if at all.

    • Shane

      Hi Ken

      How much does your 2000sqft cost you per annum?

      I live in the UK so just wanted to compare costs

      Thanks

      • Ken

        Hi Shane….we pay $1800/month for the 2,000 sq. ft.

      • Shane, it depends on what part of the country you’re in, rural vs urban, population density, retail vs warehouse, on a heavily trafficked corner or tucked into an industrial park, etc. I’ve seen 10,000 square foot open warehouse spaces rent out for $1,000/month whereas lease space on Park Avenue in NYC are upwards of $500 per square foot.

    • I feel that aligning with a national brand helps with negotiating because it gives you credibility. Powerhouse corporate, CEO himself assisted in getting me 6 months free rent, they have a very aggressive white box and I received tenant improvement dollars towards finishes.
      I wouldn’t be in business if it weren’t for them in South Lyon, MI.
      Always Appreciated!

      • What a great plug for Powerhouse! I had no idea the CEO is that involved with his franchisees. In a world where franchisors tend to forget about their franchisees’ well being after inking the franchise deal, that is very refreshing to hear.

    • Annie

      I got screwed 😀 I was so blinded by the fact that I was opening my very first location after training in someone else’s location for so many years, that I was just ready to sign the lease and get started. I know for sure I could have gotten a better deal. And it would have helped immensely because the first 4 months were awful. We were paying rent while we were fixing the space and getting it ready. My current clients came with me for the most part, but I still had to dig pretty deep into my savings to cover the remainder because traffic was slow.

      Then I didn’t have funds for marketing, so I felt stuck. I worked on some internal marketing and referral campaigns and by month six I was break even, and now we’re profitable after a year and a half, but I would have been so much further ahead if I would negotiated a couple months free rent.

      I blame you Curtis for not posting this blog two years ago lol!!

      I’ll know better when my lease comes up for renewal. Hopefully I’ll still have negotiating power at that point!

      • haha. My apologies. Everyone needs to struggle at some point though. It makes you stronger and helps you to appreciate where you are now. Congratulations for overcoming obstacles. I hope the next year and a half continue on the same upward path!

    • Brian

      We have negotiated in many markets over the past 3 years and I try to ask anywhere from 3-12 months free rent, and the whole build out. typical spaces range from 13,000 to 24,000 sqft. We have been in the position of growing to fast and were lucky to have a couple holes in the lease that let us out and gave us the ability to move to a larger facility. We usually do not get what we ask for, but if you do not ask you do not get. The bottom line is that in most markets you have the power, not the landlord.

    • Shane

      Wow Ken

      That’s amazing! So that’s 90 cents per sqft????

    • We own 3 gyms and when negotiating the first lease I always try to get the buildout paid and also 2-6 months free rent. In 2 out of 3 of my gyms I was able to do that. The LL that would not pay the buildout gave me a killer rent price. On the renewals I always try and get the landlord to pay for our franchise required “re-invention” which runs around 20k. Most of the time they will pay at least half of that fee.
      I agree with everyone else, the more knowledge of the market and professional help will pay off in the long run!!

    • tom

      I have an opportunity to double the size from 1100 floor space to 22oo. My LL and i verbally talked about 2000 a month. Any incite on months free etc. Is appreciated

      • Hey Tom, You can look through all of the comments on this page and come up with a dozen ways to get a better deal. At the end of the day though, decide what you want, and ask for it. The worst that can happen is the landlord will say no. The best that can happen is they say yes. The likely thing that will happen is a compromise somewhere in the middle. Remember that a bird in the hand is worth two in the bush, or so my dad says. The landlord would rather rent you the extra 1100 square feet now at a good deal rather than potentially wait a year and spend marketing dollars with a vacant space. Landlords hate empty space, not only because of lost revenue from the space itself, but because it’s more difficult to rent other space in the building if you have a bunch of empty spaces. No tenant, at any price, wants to be the only tenant in a vacant building. YOU have the negotiating power. Come up with a plan, and ask for it.

    • We recently moved from our original 2900 sqft. space to 4500 sqft. with a $300 difference in rent for the larger space (bargain). There is a 1/2 mile difference between the two locations. I recommend if you can have a 3rd party negotiate for you that’s great (Landlord pays them) but ensure that person (firm) has YOUR best interest in mind, and you sign when you are comfortable with the terms because at the end of the day your are on the hook. Ask for free rent for 3-6 months, the landlord builds it out or an allowance for you to build it out. Get an out clause ie. if you don’t reach break-even in 2 years you can pay a reduced fee or no fee w/ appropriate notce and leave. Finally, get ALL of your contractors in BEFORE you negotiate the build-out amount. Get their bids, and base your build-out numbers on the total plus 10-15%. The added 10-15% ensures you cover the “litle” things you may overlook ie. you build a wall for a group training room and now the sprinkler heads are too far apart by code so you need (2) additional sprinkler heads installed. Lessons learned!

      • That is a great tip Carl. There are ALWAYS unexpected expenses when doing the buildout or starting the business. Have the space inspected thoroughly, get all the quotes you need, then begin the negotiation on buildout. I like the idea of considering the 10-15% “just in case” budget. Thanks for that.

    • I would always try to start with a differed rent for a few months or a graduated lease. This is especially useful in new businesses so you can build some revenue momentum against expenses. Make sure you allocate the money you’d be paying in rent towards marketing and business building.

    • gym realtor

      I own real estate and put my own gym business in my property. Once I filled a couple of the vacant spaces with a lease to myself for 5 years to run a gym, my appraisal increased instantly by $1 million. Commercial real estate is at large appraised by an income approach. I presented this fact to other property owners and a year later I recieved 2 offers from them. One offered me $200,000 and another offered me $300,000 non recourse gift if i would open a gym in their buildings with a 5-10 year lease. Rents were very reasonable for my aea around $8psf.

      • Wow. That is awesome. And that brings up a great point. A gym isn’t a long term investment, necessarily. A gym is a business that allows you the cash flow to build your investment portfolio. That said, you can always sell your business after building it up, but I think the real trick is to take the profits from the business, and put that money into assets. Whatever assets you’re comfortable with.

        Some build up a retirement portfolio with 401K and IRAs and other mutual fund investments, others buy individual stocks, or collectible goods, or whatever they might be most interested in or whatever looks like the best investment at the time. I’m with you though. One of the best assets is real estate. If you have the means to buy the property where your gym is located, you not only build equity with the money that would have otherwise went to a different landlord, the rent from tenants provides you additional cash flow, or they help you build up the equity in the property faster. The way you’ve structured your situation is genius and I commend you.

    • Don

      Wow, reading all these comments, it’s like a different language! My wife and I own our building and land, we have never leased anything….now I’m feeling a little abnormal. We are looking at opening another venue, so as far as applying for a lease, what advice can anyone offer ? Thanks.

      • If possible, I say skip the lease and buy a building as you did previously. If there aren’t any available buildings available for purchase in the location you’re wanting, a lease is your next best option. I wouldn’t call you abnormal, I would say yours is actually the better way to do it. Unfortunately, prime real estate for a gym is typically already built upon (Think a corner McDonalds). Or you find space within a strip mall, but you’re probably not going to buy the strip mall. But if you have patience, and you are consistent in your search, you may run across another purchase opportunity in a good location. If it’s a standalone building, even if you have to pay a premium price, owning the property will likely be cheaper than leasing it from the landlord who uses your money to pay the mortgage (and hopefully pocket a little each month) If you’re convinced you’re going to lease, read through some of the stories and examples above. Congratulations on the expansion Don!

    • Sonny

      This has been very helpful and very timely. I have been searching for my first location for around 9 months now and I had all but given up. But I found a place that is “almost” perfect. The price is within budget, but all of these stories have inspired me to try to get a better deal. You never know until you try! You don’t think a landlord would take offense and refuse me the spot out of spite for asking for a better deal do you? That would concern me as I am willing to rent it at the current deal he offered. Just curious. Thanks again.

      • I don’t think you will ever have to worry about that. Landlords expect to have to negotiate each space…it’s part of the game and they know it. Just make sure you do your research on the area, and come to the table with your offer, and a good explanation to the landlord why it is in his/her best interest to consider the terms. If it makes financial sense to them, they will definitely consider. Most landlords would rather give you six months free rent on a 5 year lease, than have to sit on a vacant property for another year waiting on a tenant. They want you in that space, likely more than you want in the space. And they’re not going to tell you to piss off, simply because you asked for some consideration on the lease agreement. Good luck!

    • Gerard

      The big reason I moved to a rural area is because I didn’t have the capital to start my club in a dense urban area. If money weren’t an issue, I had a great spot picked out, and it was a fair rate for the area. However, my savings weren’t enough to be able to weather more than a few months as I sold memberships and build eft. I do well enough now, but I still dream of that location. What bothers me now after reading this post is that I probably could have offered 6 months of free rent and had been okay. Or maybe even offered a year of free rent and in return they offer 6. I reached break even within 2 months at my current location, and if I could have done the same there, I could have scaled up my business, my revenue, and my overall net worth by 10x. Oh well, I’m happy and that’s what matters most. Good post Curt.

      • Lesson learned. You’re happy now and that’s what is important. What’s in the past is in the past. You learn from it but you don’t dwell on it. You can always build your cash flow in your current business to the point that you can find that perfect spot again and open up a different or second location. The impossible just takes a little longer…

    • Lily

      I have the opportunity to rent the space next to me, but the landlord wants full price. I think he should do better than that since it might take a year to rent out the space (there are three other vacant spaces in the building right now). How can I convince him to give me a deal? I haven’t really pushed the issue

    • Sandy

      I am an owner of nine gyms in Virginia and Wisconsin as well as a consulting company and a construction company. There are many scenarios that gym owners overlook, that can be detrimental to their bottom line when negotiating a lease. Some of these scenarios are limiting the guarantee, negotiating for TI money, the rate and term, free rent, free presale space, CAM, admin and mgmt fees, and exclusive use. In addition, we have built out all of our gyms as well as completed renovations on several others which gives us the construction experience and knowledge to negotiate for items, such as gas, electric, water connections to building, sprinkler systems, zone and fees and the time it takes for permitting. This is just a few items that are critical points to be negotiated for the best interest of the gym owner. .

      • Joee

        Sandy where are your gyms in Virginia located? I am looking at opening one in VB. An Anytime Fitness.

    • Lorimds

      I am wanting to hire an expert, with specific health club experience in lease negotiations, to assist me with renewing my current lease along with additional leasing negotiations for an expansion. Any suggestions?

    • This was completely new territory for me 3 years ago as it was the first space I had ever rented. My advice for anyone looking to take out a lease on space and maximize the opportunity is this: If you don’t ask, you won’t get. You’ve gotta ask!

      In my current lease I negotiated a 3 month abatement of rent (I didn’t have to pay anything for the first 3 months). The landlord was also willing to remove a wall for me that separated two rooms, and he put me in contact with the guy that he has paint all of his properties. I got a HUGE discount on painting my space.

      I’m now looking to expand and beginning negotiations. Can’t wait to see what we can do here! Everything is negotiable!

    • Hi Curtis loved your shows, hope to see some more soon all the way over here on the Gold Coast

    • Cheri

      We are getting nowhere with our landlord unfortunately. House prices and rents and cost of living have gone up quickly in my city these past two years. He is wanting us to sign for nearly double what our rent is now. Our location is perfect for us, but he isn’t being nice about the whole thing. No concessions, no considerations, no improvements. I get the feeling that even if we decide to stay, even with the increase rent, he won’t be happy. It seems like he’s wanting a different type of business in the space. We’re not the quietest bunch! But I do have the option to sign a one year lease instead of five at only a 25% increase. I think I’ll do this to give myself more time to find a good spot. There is nothing better available right now but there might be something pop up this year. It’s going to be stressful!

      Do you guys help with site location and lease negotiations by chance? I will send an email through the contact form too. Thanks!

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