A good commercial lease length really depends on your goals as a tenant or landlord, the type of business, and the local market, but here’s a breakdown:
| Lease Type | Typical Length | Pros | Cons |
|---|---|---|---|
| Short-Term | 1–3 years | Flexibility to move, lower long-term commitment, easier to renegotiate | Higher rent per month, less stability, landlord may prioritize renewals for long-term tenants |
| Medium-Term | 3–5 years | Balance between stability and flexibility, often includes renewal options | Slightly less flexibility, rent increases may be built in |
| Long-Term | 5–10+ years | Predictable rent, security for business and landlord, easier to negotiate improvements | Harder to exit, risk of market changes, long-term commitment can be risky if business needs change |
Key considerations:
- Business stability: If your business is new or growing fast, a shorter lease is safer.
- Market conditions: In hot markets, landlords may push for longer leases; in soft markets, shorter leases may be easier to negotiate.
- Improvement investment: If you plan significant build-outs, landlords may require longer leases to justify your investment.
- Exit flexibility: Look for options to sublease, assign, or terminate early if your needs change.
Rule of thumb: Most small-to-medium businesses aim for 3–5 years with renewal options, which balances stability and flexibility.
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