Many new tenants enter the market thinking that they will need to pay one month’s rent as a security deposit for their first office space. Unfortunately, that is not the case when it comes to the Manhattan office market. When you are interested in placing an offer on office space, the offer needs to be accompanied by financials. Most often, the financials required are financials for the actual corporate entity that will sign the lease. The preferred financials are in the form of a tax return.
The decided upon amount of security deposit is dependent on the health of the financials, the amount of time the corporate entity has been established, the length of the lease, the amount of work that is required of the landlord and any cash contributions or workletter that is given to the tenant. There are many factors that tie in to the security deposit and your real estate broker will be there to guide you through that process. This is a very general quote but in a normal negotiation with decent financials you may find a security deposit of 3-4 months of security for a commitment of a 3 to 5 year lease. It may be less for shorter term with healthy financials or more for a longer term with healthy financials where the landlord is required to build out offices for the tenant or provide a cash contribution and free rent. Once again, these are VERY general estimates but this can serve as a guideline. In the event the security deposit required is high, there are ways to negotiate terms for a return of a certain amount of security.