Should I Sign a Long-Term or Short-Term Commercial Lease?

When establishing a new business in NYC, you have to decide whether to sign a long-term or short-term commercial lease. A given New York City commercial lessor — landlord — might only offer one type or the other, but as you seek out NYC retail space for lease, you can find space for whatever kind of lease you want.

For this article, we will define a short-term lease as any lease with fewer than 30 months (two and a half years). Negotiating automatic and optional lease renewal (s) can be advantageous in both leases. An experienced NYC commercial lease attorney can help explain your options and negotiate the most favorable lease terms. Here are a few pros and cons concerning long-term and short-term New York City commercial leases.

Advantages of Long-Term NYC Commercial Leases

Among the advantages of a long-term lease are these:

  • Availability — since most NYC commercial lessors prefer long-term leases, there is typically more long-term lease space available
  • Cost savings — landlords generally offer long-term retail lease space at better monthly rental rates
  • Stability — for both tenant and lessor, a long-term commercial lease provides stability; the tenant does not need to worry about where they will be operating their business, and the landlord has a steady and reliable stream of rental income
  • Expanded availability for build-outs/customization — with a long-term lease, lessors are more willing to build out/customize the space to fit a tenant’s needs (or empower the tenant to do these things)
  • Establishes consumer locational loyalty — for some types of businesses, consumer location loyalty can be as important as brand loyalty; changing the location and revenue may significantly decrease with such businesses.
  • Avoids high moving costs — Tenant’s moving costs are high. Aside from the actual costs of moving furniture, fixtures, equipment, etc.., associated costs are for advertising, changing signage, letterhead, etc.

Advantages of Short-Term NYC Commercial Leases

By contrast, there are some advantages to obtaining and signing a short-term lease. Among these are:

  • Flexibility — for obvious reasons, both the tenant and the lessor might prefer a short-term lease to allow for flexibility; maybe the lessor is planning to rebuild/remodel, and a short-term lease provides flexibility; the tenant has the freedom to “move on” more quickly.
  • Less financial risk — generally, a commercial tenant is legally liable for ALL of the rent and other obligations even if the tenant moves out early; so, a short-term commercial lease is less financially risky in this manner.
  • Ability to “test” the space — space can be “tested” for suitability in real-world market conditions with less long-term risk
  • Ability to build tenant-lessor relationship — trust can be built up between tenant and landlord, leading to a long-term renewal.
  • The only option for some tenants — a short-term lease may be the only option for some tenants like those with new businesses.
  • May avoid responsibility for maintenance costs — often, short-term commercial lease tenants are NOT responsible for maintenance costs (but, as a result, base rental rates are much higher).

Contact the NYC Commercial Lease Negotiators at Wright Law Firm NYC Today

For more information, call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC. We provide top-tier commercial real estate legal services for the NYC business community. To schedule a consultation, contact our office by e-mail or call us at (212) 619-1500.