Before you begin searching for the perfect for your company, you must to get informed about the commercial real estate leasing procedure. Being ready should help prevent you from making expeditious decisions and costly mistakes you will come to regret later on. Below are some insider tips to help make an informed decision when renting a commercial space your business
Initiate the process of finding commercial space at least 6-12 months before your current lease expires or before your perfect move-in-date. Locating the correct space and negotiating the deal will require 1-2 months depending on the size area and current market conditions. Typically the spaces you like will need some type of improvements that the time needed will depend on the scope of work.
Thoroughly analyze your company’s current and future needs. Consult with the different department heads for input in addition to some key employees.
Get familiar with the commercial property terms and definitions. Different landlords say and quote things differently. If you are unsure about what they mean do not be afraid to ask them to supply more info.
If you are not familiar with the commercial leasing process or the current market conditions then consider engaging the assistance of a tenant rep. Their services do not cost you anything because building owners compensate all the leasing commissions. The landlord agent will have an professional listing agent helping them so it would be a good idea for you to have one also.
Personally tour all the properties that meet your requirements so you can make a short list. Bear 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 duration, how much the landlord is willing to give in tenant improvement allowances, etc..
Do not settle for the first commercial properties you believe is acceptable for your requirements: continue looking until you have at least 2 to 3 other options. These extra options will work to your benefit because 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 negotiations for your first choice go silent.
Send out proposals to your top three to five options. These aren’t legally binding. You never need to have a landlord representative’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 every property. A few of the things you need to consider include the size of the space, the inquiring foundation rental rates, the required lease term, and the incremental costs (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 simply calculating the monthly base rents for each property then removing those which are way above your budget. The monthly base rent is calculated by multiplying the industrial space square feet from the asking base rate and any operating expenses then dividing by 12.
If any of the commercial spaces need tenant improvements then it is important that you figure out what improvements you want on each and get preliminary bids. This 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 examine and compare the terms of each proposal. Consider whether it is logical to return to every landlord to negotiate extra 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 result in you signing a contract your business can’t live up to.
After negotiations are finalized and you’ve 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 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 agent then they can review the lease with you as well. Industrial lease language can 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 ended the landlord will give you a draft of the lease to review.
There are many more things to consider when leasing commercial space however these ideas will help get you started. If you are a new company leasing space for the first time or an current company who has only rented 1 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.