How Can Startups Negotiate Better Terms on Their First Office Space?

Most startups treat their first office lease like they’re signing up for Spotify. They look at the price, maybe haggle over a free month, and click “Agree.”

This is how you get crushed.

Commercial real estate is the Wild West disguised as a civilized business. Landlords count on you being too busy building your product to notice you just signed away your future cash flow. I’ve seen smart founders—people who can code algorithms in their sleep—get absolutely rolled by a landlord with a bad suit and a boilerplate contract.

Stop looking for “natural light” and “good vibes.” You need to look for leverage.

Negotiating Commercial Rent and Abatement

Here is the biggest secret in the industry. The asking rent is fake.

Landlords cannot lower the face rent. If they lower the rent on paper, the valuation of their building drops. The bank gets mad. They can’t have that.

But they can give you everything else.

I once negotiated a deal for a tech firm in Austin. The landlord wouldn’t budge on the $45 per square foot price tag. My client was ready to walk. I told them to sit tight. We went back and asked for nine months of free rent on a three-year term.

The landlord said yes immediately.

Why? Because the “face rate” stayed at $45. His building looked valuable to his investors. But my client’s actual effective rent dropped by 25%. That is real money.

When you negotiate, stop obsessing over the monthly check. Ask for “rent abatement.” Ask for a tenant improvement allowance to build out the space. Ask for free parking. Landlords will throw cash at you if you just let them keep their vanity metrics intact.

Understanding the Make Good Provision

This is the one that bankrupts people.

It’s usually buried in clause 14.3 or something equally boring. It’s called the “restoration” or “make good” clause. It says that when you leave, you have to return the office to its original condition.

Sounds fair, right? Wrong.

Original condition doesn’t mean “clean.” It means stripping out the meeting rooms you built. Ripping up the cool polished concrete you poured. Removing the cabling.

I had a buddy who ran a marketing agency. They moved out of a 2,000-square-foot loft. He thought he just had to sweep the floors. The landlord hit him with a $35,000 bill to remove the glass partitions and repaint the walls to “landlord white.” He had to pay it. It wiped out his profit for the quarter.

Cap your restoration liability. Fight for a clause that says you only have to remove your furniture and leave the place “broom clean.” Do not agree to strip out improvements the landlord approved.

Commercial Property Lawyers vs. Brokers

Your broker is nice. They buy you lunch. They drive a nice car.

But remember how they get paid. They get a commission based on the total value of the lease you sign.

Think about that. If you sign a longer lease at a higher rent, they make more money. If you negotiate a killer deal with low rent and a short term, they take a pay cut.

I am not saying brokers are evil. I am saying their incentives are misaligned with yours. Use them to find space. Use them to get the landlord on the phone. But do not trust them to fight for your bottom line.

You need a shark on your side. This is where commercial property lawyers earn their keep. A broker looks at the handshake; a lawyer looks at the handcuffs. A good lawyer will spot the pass-through expenses the landlord is trying to hide. They will catch the clause that lets the landlord relocate you to the basement if a bigger tenant wants your view.

Spending two grand on a lawyer now will save you fifty grand later.

Financial Advice for Business Owners: Creating Leverage

Leverage comes from options. If the landlord knows you love the space, you lose.

Even if you have one dream office in mind, you need to tour three others. You need to send proposals to three others.

I coach founders to mention other buildings by name during negotiations. “We really like the amenities at 500 Main Street, but we prefer your location.”

Watch the landlord’s face change. Suddenly, they aren’t doing you a favor. They are competing for your business.

This is basic financial advice for business owners, yet so many ignore it because they get emotional. They fall in love with the exposed brick. Do not fall in love with a pile of bricks. Fall in love with a deal that preserves your runway.

The Commercial Lease Break Clause

Startups die. Or they explode and triple in size.

Both scenarios make a five-year lease a disaster.

If you sign a five-year deal with no way out, you are gambling. If you grow, you are stuck in a cramped box. If you fail, you are personally on the hook for rent on an empty room.

You need a break clause. Ask for a one-time option to cancel the lease after 24 months. You will probably have to pay a penalty, usually a few months of rent and the unamortized broker fees.

That penalty is cheap insurance.

I refused to let a client sign a lease last year until we got a break clause at year two. The landlord hated it. We held firm. Six months later, that client pivoted and went fully remote. If they hadn’t had that exit strategy planned, they would be bleeding cash right now.

Finalizing the Commercial Lease Agreement

If it is not in the lease, it does not exist.

The landlord promised to fix the AC? Put it in the lease.

They said you can use the roof deck? Put it in the lease.

They said they wouldn’t raise the CAM fees more than 3%? Put it in the lease.

Handshakes are for after the ink is dry. Until then, assume everyone is lying to you. Because in commercial real estate, they usually are.

Negotiate hard. Be willing to walk away. And never let them see you sweat.