Before you begin searching for a great for your business, you should to get educated about the commercial property leasing procedure. Being prepared will help prevent you from making expeditious decisions and costly mistakes thatyou will probably regret later on. The following are some insider tips to help make an informed decision when leasing a commercial real estate your business
Start the process of hunting for commercial space at least 6-12 months before your current lease expires or before your perfect move-in-date. Locating the perfect space and negotiating the deal will take 1-2 months depending on the size space and current market conditions. Typically the spaces you like will need some type of changes that the time required will depend on the scope of work.
Thoroughly analyze your business’s present and future needs. Consult with the various department heads for input as well as some key employees.
Get acquainted with allthe commercial real estate terms and definitions. Various landlords state and quote things otherwise. If you’re unsure about what they mean don’t be afraid to ask them to get more information.
If you’re not familiar with the commercial property leasing process or the present market conditions then consider engaging the support of a tenant representative. Their services don’t cost anything since landlords pay all of the leasing commissions. The landlord rep will have an experienced listing agent representing them so it would be a great idea for you to have one also.
Personally visit all of the spaces that meet your needs so thatyou can make a brief list. Keep in mind that the layouts can be reconfigured so don’t get stuck on that. Ask the landlord agents a great deal of questions about the ownership, property amenities, required lease term length, how much the landlord is willing to give in tenant improvement allowances, etc..
Don’t settle for the first commercial space you think is acceptable for your needs: continue looking until you have at least two to three alternative choices. These extra options will work to your benefit since you will know what to expect throughout the lease negotiations and you will gain more leverage with multiple landlords competing for your tenancy. They also give you something to fall back to if the negotiations for your first choice fall through.
Send out proposals to your top three to five choices. These are not legally binding. You don’t ever need to have a landlord representative’s verbal note. Everything should be in writing.
To help you decide what property is most suitable for your business, prepare a spreadsheet to do an apples to apples comparison of each property. Some of the things you need to put into consideration include the dimensions of the distance, the inquiring foundation rental rates, the required lease duration, and the incremental costs (taxes, insurance, maintenance, etc). You can also take note about the advantages and disadvantages of each property. If you’re budget conscious then you can quickly narrow down the list by simply calculating the monthly base rents for each property then eliminating those that are way above your budget. The monthly base rent is calculated by multiplying the commercial space square feet from the asking base rate and any operating expenses then dividing by 12.
If some of the commercial properties need tenant improvements then it’s critical that you determine what changes you want on each and get bids from contractors. That way if the landlord is offering a tenant improvement allowance you will learn how much out of pocket you will have to pay above and beyond what the landlord is willing to give.
Carefully analyze and compare the terms of each proposal. Consider whether it is logical to return to each landlord to negotiate extra concessions. Be certain you completely understand the total expenses you’re expected to cover. Don’t get emotionally attached to a specific property until the negotiations are over. Emotional attachment might lead to you signing a contract thatyour business can’t live up to.
After negotiations are finalized and you have made your selection now it’s time to have the landlord provide you the first draft of the commercial rental contract.
Now it’s time to reassess the commercial rental contract. It would be advisable for you to hire an attorney to review the lease. For those who have a tenant representative then they can review the lease with you also. Industrial lease language can be negotiated. If you don’t like certain lease items or would like to propose new language now is the time to do so.
Once the end of rental contract negotiations has ended the building owner will provide you a draft of the lease to review and sign.
There are several more things to consider when renting commercial real estate however these ideas will help get you going. If you’re a new business renting commercial property for the first time or an current business who has only rented 1 or two spaces then consider getting help from a tenant rep. Their services do not cost you anything and you will save a great deal of money and time.