When you rent New York commercial real estate, landlords require payment of a security deposit at the time of lease signing. It will be returned to you at the end of the lease provided you comply with all relevant lease terms. Unlike residential properties, commercial real estate landlords have much greater freedom in the amount of security deposit they can demand.
Manhattan real estate security deposits usually range from two to 12 months depending on the landlord’s perceived financial risk. Established companies with strong financial statements will pay less security than will start-up ventures that are just establishing their profitability. A respected commercial real estate agent will help you find the best value for your budget and credit history and negotiate favorable lease terms with respect to your security deposit.
Determining a Landlord’s Financial Risk
To determine your creditworthiness and their financial risk, commercial real estate landlords will analyze the following:
1. How much money they will need to spend on your occupancy (i.e., construction costs and free rent).
2. Your business and credit history as evidenced by the last two years of your corporate tax returns and/or financial statements prepared by a CPA. An experienced real estate broker will ensure that you do not pay an excessive commercial real estate security deposit. Working with a broker who understands the ins and outs of New York City commercial real estate strategy will ensure that you secure the best financial deal.
Minimizing Office Space Security Deposits
In order to minimize the amount of your security deposit, a skilled real estate broker:
1. Deals with landlords with a reputation for being pragmatic, as opposed to conservative landlords known for being tough on security deposits.
2. Identifies spaces that are built-out and already meet a client’s architectural requirements, as opposed to raw spaces that require extensive construction by the landlord. Higher construction costs typically translate to higher office space security deposits.
3. Possesses the ability to negotiate a “burn-down” in your security deposit under the lease terms, whereby your security deposit decreases over time following periods of consistent and timely rental payments.
4. Understands the amount of security deposit that would be reasonable given your type of business and financial history.
5. Negotiates whether a security deposit should be paid with a letter of credit and whether the terms of a Good Guy Guarantee can be made more favorable.
There is few things worse in real estate than finding an ideal property but having a large security deposit requirement kill the deal. At Metro Manhattan Office Space, finding your ideal location is only the first step. We then help ensure that all of your interests are being protected. We know that avoiding excessive costs can mean the difference between success and failure in your business.
For a free consultation, contact Principal Broker Alan Rosinsky at 212-447-5403.