If you have been thinking of starting your own business in New York City, now may be the time since NYC remains “awash with space,” as reported in this NY Post media article. From the report, Manhattan availability rates continue to hover around 17%, and average asking rents are around $75 per square foot. As reported, the vacancies throughout the city remain high partly because, post-pandemic, workers want to keep working from home or to have a hybrid of work-from-home and in-office work.
This trend is dampening the need for offices and other workspaces to expand. As with many things in New York City, this is leading a trend toward upgrading existing space, aiming for quality over quantity. Because commercial lease tenants seek smaller spaces (but still have money to spend), tenants can be “picky” and pay more per square foot for higher-quality space. In this sort of market with many vacancies, newer buildings outperform older commercial spaces.
The glut of NYC commercial real estate space is also encouraging another trend that seeks to convert existing space to new and potentially better uses. For example, quite a bit of NYC office and retail space is being converted to warehousing and residential space.
In combination, this glut of vacancies makes commercial space more affordable overall. As such, this may be an excellent opportunity to “take the plunge” into starting your own business or buying an existing NYC business.
A Few Things to Consider
If you are considering entering into a New York City commercial lease, you will want to hire a New York attorney with experience in negotiating a commercial lease. Aside from practical issues like the base rent and other costs that must be paid to the landlord, many thorny legal issues must be negotiated. Here are a few:
- Terms of lease and renewal options — how long will the lease go, and will either party have the opportunity to renew the lease when it ends?
- Base rent escalator clauses — how much will the base rent go up each year? Is it a fixed percentage, or will it be indexed (for example, to the Consumer Price Index)?
- Other costs/expense escalator clauses ( CAM charges based on vacancies )
- Default provisions — what are legal options if the landlord fails to perform or the tenant fails to pay the rent/costs?
- Cure provisions and grace periods
- Provisions related to public health emergencies — since the pandemic, these provisions are now subject to intense negotiations
- Hold harmless and other indemnity provisions
- Insurance requirements
- Build-outs and improvements (if needed) — these provisions cover what work needs to be done, which party will do the work, and which party will pay for the work.
- Restoration to original condition provisions
- Subleasing and assignments
- Compliance with NYC zoning, building, and environmental laws and regulations — is the tenant or the landlord responsible for the compliance, and what about new laws that might be enacted during the lease term?
- And more
Contact the NYC Commercial Lease Negotiators at Wright Law Firm NYC Today
Call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC for more information. We provide top-tier commercial real estate legal and legal services for the NYC business community. To schedule a consultation, contact our office by e-mail or call us at (212) 619-1500.