Before you begin searching for an excellent wine tasting in Sonoma for your startup, you will need to get informed about the commercial property leasing process. Being ready will help prevent you from making impulsive decisions and costly mistakes you will end up regretting later on. The following are some insider tips to help make an informed choice when leasing a commercial property your company
Start the process of hunting commercial space at least 6-12 months before your current lease expires or before your perfect move-in-date. Finding the correct space and negotiating the deal alonewill take 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 that the time needed will depend on the scope of work.
completely analyze your company’s present and future needs. Consult with the various department heads for input in addition to some key employees.
Get acquainted with allthe commercial property terms and definitions. Different landlords say and quote things differently. If you are unsure about what they mean don’t be afraid to ask them to supply more information.
If you are not familiar with the commercial real estate leasing process or the present market conditions then consider engaging the assistance of a tenant agent. Their services don’t cost anything because building owners pay all the leasing commissions. The landlord agent will have an knowledgable listing agent representing them so it would be a good idea for you to have one as well.
Personally tour all the spaces that meet your needs so you can make a brief list. Bear in mind that the layouts can be reconfigured so don’t get stuck on that. Ask the landlord agents a lot of questions about who owns the property, property amenities, required lease duration, how much the landlord is prepared to give in tenant construction allowances, etc..
Don’t settle for the first commercial space you think is suitable for your needs: continue looking until you have at least two 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’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 choices. These are not 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 best suited for your business, prepare a spreadsheet to do an apples to apples comparison of each property. A few of the things you need to consider include the dimensions of the space, the inquiring base rental rates, the necessary lease duration, and the incremental expenses (taxes, insurance, maintenance, etc). You can also 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 eliminating 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 plus any operating expenses then dividing by 12.
If some of the commercial spaces require improvements then it is important that you figure out what changes you want on each and get prelim construction bids. This way if the landlord is offering a finish out allowance you will know just how much out of pocket you’ll need to pay over and beyond what the landlord is prepared 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. 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 your business can’t live up to.
After discussions are finalized and you’ve made your selection now it is time to have the landlord offer you the first draft of the commercial lease contract.
Now it is time to review the commercial lease contract. It would be wise 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 also. Industrial lease language can be negotiated. If you don’t like certain lease items or would like to propose new language now is the time to do so.
Once the end of lease contract negotiations has ended the landlord will provide you a draft of the lease to review.
There are several more things to consider when leasing commercial property however these tips will help get you started. If you are a new business leasing commercial property for the first time or an current business who has only rented 1 or two spaces then consider getting help from a tenant agent. Their services do not cost you anything and you’ll save a great deal of money and time.
