Before you start looking for the perfect for your small company, you need to get informed about the commercial property leasing process. Being prepared will prevent you from making foolish decisions and costly mistakes you will end up regretting in the future. Below are some insider tips to help make an informed decision when renting a commercial real estate your company
Initiate the process of hunting for commercial rental space at least 6-12 months before your existing lease expires or before your ideal move-in-date. Finding the perfect space and negotiating the deal will take 1-2 months depending upon the size area and current market conditions. In most cases the spaces you like will need some sort of tenant improvements which the time required will depend on the scope of work.
Thoroughly research your company’s current and future needs. Consult with the various department heads for input in addition to some key employees.
Get familiar with allthe commercial real estate terms and definitions. Various landlords say and quote things differently. If you are unsure about what they mean don’t be afraid to ask them to get more information.
If you are not familiar with the commercial leasing process or the current market conditions then consider engaging the assistance of a tenant agent. Their services don’t cost you anything because building owners pay all the rental commissions. The landlord representative will have an expert listing agent helping them so it would be a great idea for you to have one too.
Personally tour all the spaces that meet your requirements so you can make a brief list. Keep in mind that the designs can be reconfigured so don’t get stuck on that. Ask the landlord representatives a great deal of questions about the ownership, property amenities, required lease term length, how much the landlord is willing to give in tenant construction allowances, etc..
Do not settle for the first commercial properties you think is suitable for your requirements: continue looking until you have at least two to three other choices. These extra options will work to your benefit because you will know what to expect during 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 negotiations to your first choice go sideways.
Send out proposals to your top three to five choices. These are not legally binding. You never need to take a landlord representative’s verbal word. Everything should be in writing.
To help you decide what property is best suited for your business, prepare a spreadsheet to do an apples to apples comparison of each property. Some of the things you should consider include the size 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 that are way over your budget. The monthly base rent is calculated by multiplying the industrial space square feet from the asking base rate plus any operating expenditures then dividing by 12.
If some of the commercial spaces need tenant improvements then it’s important that you determine what improvements you want on each and get preliminary bids. That way if the landlord is offering a tenant improvement allowance you will know just how much out of pocket you will need 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. Make sure you fully understand the total expenses you are expected to cover. Do not get emotionally attached to a specific property until the negotiations are over. Emotional attachment might lead to you signing a contract your business cannot live up to.
After negotiations are finalized and you have made your selection now it is time to have the landlord provide you the first draft of the commercial lease contract.
Now it is time to reassess the commercial lease contract. It would be advisable for you to hire an attorney to review the lease. If you have a tenant agent then they can review the lease with you also. Commercial lease language can be negotiated. If you don’t like particular lease items or want to propose new language now is the time to do so.
When the end of lease contract negotiations has ended 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 tips will help get you started. If you are a new business leasing commercial space for the first time or an existing business who has just rented 1 or two spaces then consider getting help from a tenant representative. Their services do not cost you anything and you will save a great deal of money and time.