Before you begin searching for a good for your startup, you will need to get informed about the commercial property leasing procedure. Being ready will keep you from making rapid decisions and costly mistakes you will regret later on. Below are some insider suggestions to help make an informed choice when letting a commercial space your company
Start 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 correct space and negotiating the deal alonewill require 1-2 months depending on the size space and current market conditions. In most cases the spaces you like will require some sort of improvements which the time required will depend on the scope of work.
completely research your business’s current and future needs. Consult with the different department heads for input as well as some key employees.
Get acquainted with the commercial real estate terms and meanings. Various landlords say and quote things otherwise. If you are unsure about what they mean don’t be afraid to ask them to get more info.
If you are not knowledgeable about the commercial property leasing process or the current market conditions then consider engaging the assistance of a tenant rep. Their services don’t cost you anything because building owners compensate all of the rental commissions. The landlord agent will have an professional listing agent representing them so it would be a great idea for you to have one too.
Physically visit all of the spaces that meet your requirements so you can make a brief list. Bear in mind that the designs can be reconfigured so don’t get stuck on that. Ask the landlord reps a great deal of questions about who owns the property, 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 acceptable for your requirements: continue looking until you have at least two to 3 alternative options. These extra 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 sideways.
Send out proposals to your top three to five options. These are not legally binding. You never want to have a landlord representative’s verbal note. Everything should 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. A few of the things you should consider include the size of the distance, the asking foundation rental rates, the necessary 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 removing those which are way over your budget. The monthly base rent is calculated by multiplying the commercial space square feet by the asking base rate and any operating expenditures then dividing by 12.
If some of the commercial spaces require tenant improvements then it’s important that you figure out 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’ll 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 is logical to go back to each landlord to negotiate extra concessions. Be certain you completely understand the total expenses you are expected to cover. Don’t get emotionally attached to a certain property until the discussions are over. Emotional attachment might lead to you signing a contract your business cannot live up to.
After discussions are finalized and you’ve made your selection now it’s time to have the landlord offer you the first draft of the commercial lease contract.
Now it’s time to review the commercial lease contract. It would be advisable for you to hire an attorney to review the lease. If you have a tenant representative then they can review the lease with you also. Industrial lease language can 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 finished the building owner will provide you a copy of the lease to sign.
There are several more things to consider when renting commercial space 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 two spaces then consider getting help from a tenant agent. Their services don’t cost you anything and you’ll save a lot of money and time.