Before you start searching for a great for your business, you will need to get educated about the commercial property leasing procedure. Being ready should prevent you from making expeditious decisions and costly mistakes you will end up regretting later on. The following are some insider tips to help make an informed decision when letting a commercial space your company
Initiate the process of searching for commercial space at least 6-12 months before your existing lease terminates or before your ideal move-in-date. Locating the perfect space and negotiating the deal alonewill require 1-2 months depending upon the size space and current market conditions. Typically the spaces you like will need some sort of improvements that the time required will depend on the scope of work.
Thoroughly analyze your business’s current and future needs. Consult with the various department heads for input in addition to some key employees.
Get acquainted with the commercial property terms and meanings. Various landlords state and quote things differently. If you are unsure about what they mean don’t be afraid to ask them to supply more information.
If you are not familiar with the commercial real estate leasing process or the current market conditions then consider engaging the help of a tenant representative. Their services don’t cost you anything because landlords pay all of the rental fees. The landlord rep will have an knowledgable listing agent advising them so it would be a great idea for you to have one too.
Personally tour all of the properties that meet your needs so you can make a brief list. Keep in mind that the layouts can be reconfigured so don’t get stuck on that. Ask the landlord reps a great deal of questions regarding the ownership, property amenities, required lease duration, how much the landlord is willing to give in tenant improvement allowances, etc..
Don’t settle for the first commercial space you think is suitable for your needs: continue looking until you have at least 2 to 3 alternative choices. These additional options will work to your advantage since you will know what to expect during the lease negotiations and you will gain more leverage with multiple landlords competing for your business. They also give you something to fall back to whether the negotiations to your first choice go sideways.
Send out proposals to your top three to five choices. These are not legally binding. You never want to take a landlord agent’s verbal word. Everything needs to be in writing.
To help you decide what property is most suitable for your company, prepare a spreadsheet to do an apples to apples comparison of each property. Some of the things you should consider include the dimensions of the space, the inquiring base rental rates, the required lease term, and the incremental expenses (taxes, insurance, maintenance, etc). You can also take note about the advantages and disadvantages of each property. If you are budget conscious then you can quickly narrow down the list by simply calculating the monthly base rents for each property then eliminating those which are way over your budget. The monthly base rent is calculated by multiplying the industrial space square feet by the asking base rate and any operating expenses then dividing by 12.
If some of the commercial properties need finish out then it is important that you figure out what improvements you want on each and get construction bids. This way if the landlord is offering a finish out allowance you will know just how much out of pocket you will have to pay over and beyond what the landlord is willing to give.
Carefully analyze and compare the terms of each proposal. Consider whether it makes sense to go back to each landlord to negotiate additional concessions. Be certain you fully understand the total expenses you are expected to cover. Don’t get emotionally attached to a specific property until the negotiations are over. Emotional attachment might result in you signing a contract your 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 review the commercial rental contract. It would be wise for you to hire an attorney to review the lease. If you have a tenant agent then they could review the lease with you as well. Industrial lease language could be negotiated. If you don’t like particular lease items or want to propose new language today is the time to do so.
When the end of rental contract negotiations has ended the landlord will provide you a draft of the lease to review and sign.
There are many more things to consider when renting commercial real estate however these tips will help get you started. If you are a new company renting commercial property for the first time or an existing company who has just leased one or 2 spaces then consider getting help from a tenant rep. Their services do not cost you anything and you will save a lot of time and money.