Before you start searching for a great for your startup, you will need to get educated about the commercial space leasing process. Being prepared will help prevent you from making hurried decisions and costly mistakes thatyou will end up regretting in the future. Below are some insider tips to help make an informed choice when renting a commercial space your business
Start the process of searching commercial space at least 6-12 months before your current lease expires or before your ideal move-in-date. Finding the right space and negotiating the deal alonewill take 1-2 months depending upon the size area and current market conditions. In most cases the spaces you like will need some type of improvements which the time required will depend on the scope of work.
completely analyze your company’s current and future needs. Consult with the different department heads for input as well as some key employees.
Get familiar with allthe commercial space terms and definitions. Different landlords state and quote things otherwise. If you’re in doubt about what they mean don’t be afraid to ask them to provide more information.
If you’re not knowledgeable about the commercial property leasing process or the current market conditions then consider engaging the help of a tenant representative. Their services don’t cost you anything since building owners compensate all of the leasing commissions. The landlord rep will have an knowledgable listing agent advising them so it would be a good idea for you to have one too.
Physically visit all of the properties that meet your requirements so thatyou can make a short list. Keep in mind that the designs can be reconfigured so don’t get stuck on that. Ask the landlord representatives a lot of questions regarding the ownership, property amenities, required lease term length, how much the landlord is prepared to give in tenant construction allowances, etc..
Don’t settle for the first commercial properties you think is suitable for your requirements: continue looking until you have at least 2 to 3 other options. These additional options will work to your advantage because you will know what to expect throughout the lease negotiations and you’ll gain more leverage with multiple building owners competing for your tenancy. 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 options. 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 every property. Some of the things you need to put into consideration include the dimensions of this distance, the inquiring foundation rental rates, the required lease term, 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 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 plus any operating expenditures then dividing by 12.
If some of the commercial spaces need improvements then it is important that you figure out what improvements you want on each and get construction bids. That way if the building owner is offering a tenant improvement allowance you will learn how much out of pocket you’ll need to pay above and beyond what the building owner is prepared to give.
Carefully examine and compare the terms of each proposal. Consider whether it makes sense to go back to every landlord to negotiate extra concessions. Make sure you fully understand the total expenses you’re expected to cover. Don’t get emotionally attached to a certain property until the discussions are over. Emotional attachment might result in 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 this commercial lease contract.
Now it is time to review the commercial lease 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. Commercial lease language could be negotiated. If you don’t like certain lease items or would like to propose new language today is the time to do so.
Once the end of lease contract negotiations has ended the building owner will supply you a draft of the lease to review and sign.
There are many more things to consider when leasing commercial space however these tips will help get you started. If you’re a new company leasing commercial space for the first time or an current company who has just leased 1 or 2 spaces then consider getting help from a tenant rep. Their services don’t cost you anything and you’ll save a lot of money and time.