Before you start searching for a good for your company, you need to get educated about the commercial real estate leasing process. Being prepared should prevent you from making impulsive decisions and costly mistakes thatyou will probably regret later on. Below are some insider tips to help make an informed decision when leasing a commercial space your company
Start the process of finding commercial space at least 6-12 months before your existing lease expires or until your perfect move-in-date. Locating the right space and negotiating the deal will take 1-2 months depending upon the size area and current market conditions. Typically the spaces you like will require some sort of improvements that the time needed will depend on the scope of work.
Thoroughly examine your business’s current and future needs. Consult with the various department heads for input in addition to some key employees.
Get familiar with allthe commercial space terms and definitions. Different landlords say and quote things differently. If you are in doubt about what they mean do not be afraid to ask them to provide more info.
If you are not familiar with the commercial real estate leasing process or the current market conditions then consider engaging the support of a tenant rep. Their services do not cost you anything since building owners pay all of the leasing fees. The landlord agent will have an experienced listing agent representing them so it would be a good idea for you to have one as well.
Physically visit all of the properties that meet your requirements so thatyou can make a short list. Keep in mind that the layouts can be reconfigured so don’t get stuck on that. Ask the landlord reps a lot of questions about the ownership, property amenities, required lease term length, how much the landlord is willing to give in tenant construction allowances, etc..
Don’t settle for the first commercial properties you think is suitable for your requirements: continue searching until you have at least 2 to three other choices. These additional 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 building owners competing for your business. They also give you something to fall back to if the discussions to your first choice go silent.
Send out proposals to your top three to five choices. These are not legally binding. You don’t ever want to have a landlord representative’s verbal note. Everything should be in writing.
To help you decide what property is best suited for your company, prepare a spreadsheet to do an apples to apples comparison of every property. A few of the things you should consider include the size of the space, the inquiring foundation rental rates, the necessary lease duration, and the incremental expenses (taxes, insurance, maintenance, etc). It is also possible to take note about the pros and cons of each property. If you are budget conscious then you can quickly narrow down the list by calculating the monthly base rents for each property then removing those that are way over your budget. The monthly base rent is calculated by multiplying the commercial space square feet from the asking base rate and any operating expenditures then dividing by 12.
If some of the commercial properties require tenant finish-outs then it’s critical that you determine what changes you want on each and get construction bids. This way if the landlord is offering a tenant improvement 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 is logical to return to every landlord to negotiate additional concessions. Make certain you fully understand the total expenses you are expected to cover. Don’t get emotionally attached to a specific property until the discussions are over. Emotional attachment might lead to you signing a contract thatyour business can’t live up to.
After discussions are finalized and you have made your selection now it is time to have the landlord provide you the first draft of the commercial rental contract.
Now it is time to review 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 could review the lease with you as well. Industrial lease language could be negotiated. If you do not like certain lease items or want to propose new language today is the time to do so.
When the end of rental contract negotiations has finished the building owner will provide you a draft of the lease to sign.
There are several more things to consider when leasing commercial real estate however these suggestions will help get you going. If you are a new company leasing commercial space for the first time or an existing company who has just rented one or 2 spaces then consider getting help from a tenant agent. Their services do not cost you anything and you will save a great deal of time and money.