What is a "normal security deposit"? It depends. The security deposit is a guard against the landlord's interpreted financial risk. Generally Landlords ask themselves two questions in considering security deposits:

1. How much is it costing me in terms of Tenant Improvement dollars and Rent Abatement in order to get this tenant into my building.

2. How much faith do I have in the financial soundness of the entity signing the lease?

If you're Microsoft, you'll likely pay no security deposit.  If you're  a start up you will most likely need to come up with a large security deposit.  Security deposits usually fall between the equivalent of 1 to 6 months of rent.

Here are a few things that may help you keep your security deposit on the lower end of this scale.

Personal Guarantee

A personal guarantee is a legal contract between a landlord and an individual to guarantee a specific obligation of a business, usually the remaining rental obligation under a lease. Personal guarantees provide the landlord with additional recourse in the event of a default on a lease agreement. The implications of a personal guarantee are significant because personal assets (e.g., house, cars, retirement funds, etc.) are at risk if the party defaults on the lease.  Many times it is possible for the Personal Guaranty to expire "x" months after lease commencement, or limiting the dollar amount of guaranty to tenant improvements, free rent and commissions.  Sometimes it is possible to have the guaranty amount diminish in equal annual installments over the lease term or a portion of the lease

Letter of Credit

A letter of credit is not property of a bankruptcy estate and thus can provide a landlord with quick access to funds via the issuing bank.

Find Built Space

Building office space can easily cost $60 per rentable square foot or more.  On a 20,000 RSF lease transaction that is $1,200,000.00.  Landlords shelling out this kind of money want their pound of flesh in the form of security. One of the easiest ways to reduce your security deposit is to find space that is 2nd or 3rd generation space which is already built out and will only require carpet and paint and perhaps moving a wall here and there, as opposed to raw space or space that will need to be demoed and where the landlord will "build to suit" or give you a cash contribution toward the build-out.  Already built space will be viewed more favorably when it comes to determining the security deposit.  In all likelihood your Tenant Representative will have to point this out to the Landlord.

Take Less Free Rent

A seasoned Tenant Rep should always negotiate a healthy amount of rent abatement. The net result of negotiating free rent can range from 3 months all the way to a month of free rent per year or more. From a landlord's perspective, free rent is a necessary evil dictated by the market. It is also looked at as cash out of their pocket that they will want to securitize depending on the strength of your financial statement.  From a Tenant's perspective there are a two strategies worth considering:

1. Half rent instead of free rent: let's say instead of 6 months of free rent you agree to 12 months of half rent. This helps the Landlord because they have immediate cash flow, which should equate to less risk and a lower security deposit.

2. Take less free rent.  Every deal has a lot of moving parts. Evaluating less free rent involves simple math what is it worth to you and to the Landlord to have less free rent in exchange for less security or perhaps a lower base rent?

Negotiate a "Burn-Down"

If you pay your rent on time, eventually, you should have established enough credibility that your Landlord feels comfortable holding less security.  You have to negotiate the Burn Down up front and it must be part of the lease. Typically, the idea is that each year of the lease term or a portion of the lease term, the landlord will give back a month (or more) of security deposit.

The key is that there are no hard and fast rules - negotiate what makes sense for your business; and make it part of the lease document.

Everything after your name and landlord's name is a negotiation.