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.)
Comments
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.)