Yes, commercial leases are routinely 10 years or greater.
Sears would actually ask for 100 year leases on property, and at first the landlords were pretty excited about it. After some time, though, the market value of those leases became much higher than Sears was paying. I doubt the landlords were quite as happy when Sears turned around and subleased the property for much, much more money.
10+ years are common for more mature businesses. Usually the leases I've signed are 3-5 years (three is the shortest they usually come for commercial space). Most leases are 7-10 years; bigger or more established companies will do 10+.
Sometimes people go for long leases because the landlord will pay for tenant improvements (which can be tens or hundreds of thousands of dollars) or rent abatement. Long leases are occasionally engaged in by excessively optimistic entrepreneurs who see an opportunity for free money (rent abatement or TI) and who assume they'll be able to pay for it out of revenues by the time the abatement ends.
You're right about Sears though. Some investment analysts look for real estate plays in non-real estate companies when they have very long undermarket leases that could be worth a lot of money if sublet. (Or owned property at very low historical cost, but that's a separate discussion.)
Sounds like the startup that is running the office space could use some lessons from lean startups themselves.
Who signs a 15 year lease at $12,000 without knowing they can afford it? That's exhorbitant and I am sure that they could find less space for less money and build the business slowly.
This business, probably should go out of business. Let a smarter business person startup a better run alternative in the Portland area. There are myriad examples of shared spaces that aren't losing money.
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[ 0.25 ms ] story [ 32.2 ms ] threadAre leases of this length common?
Sears would actually ask for 100 year leases on property, and at first the landlords were pretty excited about it. After some time, though, the market value of those leases became much higher than Sears was paying. I doubt the landlords were quite as happy when Sears turned around and subleased the property for much, much more money.
Sometimes people go for long leases because the landlord will pay for tenant improvements (which can be tens or hundreds of thousands of dollars) or rent abatement. Long leases are occasionally engaged in by excessively optimistic entrepreneurs who see an opportunity for free money (rent abatement or TI) and who assume they'll be able to pay for it out of revenues by the time the abatement ends.
You're right about Sears though. Some investment analysts look for real estate plays in non-real estate companies when they have very long undermarket leases that could be worth a lot of money if sublet. (Or owned property at very low historical cost, but that's a separate discussion.)
Who signs a 15 year lease at $12,000 without knowing they can afford it? That's exhorbitant and I am sure that they could find less space for less money and build the business slowly.
This business, probably should go out of business. Let a smarter business person startup a better run alternative in the Portland area. There are myriad examples of shared spaces that aren't losing money.
As a business posting, this was irresponsible. Hmmm, begging for donations when my startup fails? I think I'd rather get a job (perish the thought).