Commercial Real Estate · January 2026
The Landlord's Market Has Shifted — How to Negotiate Your Lease
Tenants who understand their leverage and come to the table with skilled legal counsel are still securing favorable terms in most markets.
Commercial real estate markets in Los Angeles and across California have shifted. Vacancy rates in several submarkets have pushed past pre-2020 levels, concessions are back in a way landlords do not advertise but will negotiate, and tenants who show up informed are securing lease terms that would have been unthinkable two years ago. The caveat: the leverage is not distributed evenly, and landlords still draft leases that reflect 2019 expectations. The gap between what a tenant can get and what a landlord will offer on a first draft is wider than most tenants realize.
Rent is the headline, but concessions are the margin
Base rent is visible and therefore the first thing negotiated. But free-rent periods, tenant improvement allowances, and operating-expense exclusions often move the effective cost of the deal more than base rent ever does. A TI allowance that covers a realistic build-out, three to six months of free rent during construction and ramp-up, and a clear cap on CAM escalations can change the NPV of a ten-year lease by more than a twenty-percent rent reduction would. Landlords know this. Tenants often focus only on the rent.
Personal guarantees deserve real pushback
Personal guarantees remain standard in first drafts and are more negotiable than most tenants assume. A full guarantee for the life of the lease is the landlord opening position. A good-guy guarantee — limiting personal liability to the period the tenant actually occupies the space — is often achievable and materially better for the tenant. A burn-down guarantee that reduces over time is another workable structure. Accepting a full personal guarantee on a ten-year lease without negotiating is one of the most common and most consequential mistakes first-time commercial tenants make.
Assignment and subletting rights matter more than tenants think
A lease with no practical assignment rights is a lease you cannot get out of. Businesses change — ownership changes, concepts evolve, locations underperform. The assignment and subletting provisions determine whether the lease is an asset or a liability if any of that happens. Landlord consent "not to be unreasonably withheld" is the floor. Permitted transfers to affiliates, successors in merger, and buyers of the business should be carved out of the consent requirement entirely. Recapture rights — the landlord's ability to take the space back if you try to sublet — should be narrowed or eliminated.
Restaurants, retail, and hospitality have their own list
For restaurant operators and hospitality tenants, the standard commercial lease checklist is only the starting point. Exhaust and ventilation rights, signage provisions, exclusive-use clauses, operating hours, and liquor license cooperation clauses are all deal terms that look boilerplate in the draft and become the whole fight during a later dispute. The build-out allowance in a restaurant lease should assume realistic restaurant build costs — which have risen sharply since 2021 — not the generic office-tenant number that landlords often offer.
Do not sign the letter of intent casually
The LOI is where most of the leverage sits. Once a deal structure is in an LOI, it becomes the reference point for the full lease negotiation, and the burden of moving any term shifts meaningfully to the tenant. Counsel should review the LOI before you sign it. The fee for that review is trivial compared with the value of getting the right starting point.
Tenants who negotiate well in 2026 come to the table prepared: a market comparables package, a clear priority list of non-rent economic terms, and a clear understanding of which lease provisions are most likely to matter during the life of the lease. That preparation is the difference between a lease that works and a lease that constrains the business for ten years.
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