If you are the tenant, this can be either a good deal or a bad deal. It is a strong point if the first year rent is going to be stable for some years in advance. For a landlord to give a five year option with a one year lease, he is not likely to spell out the five year option rate. An option is always more beneficial to the tenant than it is the landlord, so normally a landlord will not get specific and will have the rates either be left to negotiation or market.
If rates are lower, as they are in this bad real estate economy at the moment, and you believe that the rates are going to significantly increase in the future, it may be better to negotiate a longer term lease at the lower rates that may exist for you today.
It is absolutely a tenant's market in most areas today. Having gone through several of these in the past, I previously marveled at the tenants that had really low rental rates in a high rent market, because they had trusted in their judgment to lock in rates a long term lease.
To discuss this just a bit more, if you have a long term lease with low rates, you should absolutely make sure you have to right in the lease to assign your lease or to sub-let. This will allow you to perhaps leverage your position in the future, where you may be able to enjoy the spread between the rates in your lease and higher market rates at the time.
Onward and Upward!
Jun 19, 2012