Before you begin searching for a good warehouse space for your small company, you must to get informed about the commercial property leasing process. Being prepared should help prevent you from making foolish decisions and costly mistakes you will come to regret in the future. Below are some insider tips to help make an informed decision when renting a commercial property your business
Initiate the process of searching for commercial space at least 6-12 months before your current lease terminates or before your perfect move-in-date. Finding the perfect space and negotiating the deal will require 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 that the time required will depend on the scope of work.
completely research your business’s present 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 meanings. Various landlords state and quote things otherwise. If you are in doubt about what they mean don’t be afraid to ask them to supply more information.
If you are not knowledgeable about the commercial leasing process or the present market conditions then consider engaging the support of a tenant agent. Their services don’t cost anything since building owners compensate all the rental commissions. The landlord rep will have an knowledgable listing agent representing them so it would be a good idea for you to have one too.
Personally see all the properties that meet your requirements so you can make a short list. Bear in mind that the designs 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 construction allowances, etc..
Don’t settle for the first commercial space you believe is acceptable for your requirements: continue searching until you have at least 2 to 3 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 numerous building owners competing for your business. They also give you something to fall back to whether the negotiations for your first choice go sideways.
Send out proposals to your top three to five choices. These aren’t legally binding. You don’t ever want to take a landlord agent’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 every property. Some of the things you need to put into consideration include the size of the distance, the asking foundation rental rates, the required lease duration, and the incremental costs (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 industrial space square feet from the asking base rate and any operating expenses then dividing by 12.
If any of the commercial properties need changes then it’s important that you figure out what improvements you want on each and get construction bids. This way if the landlord is offering a tenant improvement allowance you will know just how much out of pocket you’ll have to pay over and beyond what the landlord is willing to give.
Carefully examine and compare the terms of each proposal. Consider whether it is logical to go back to every landlord to negotiate additional concessions. Make sure you completely understand the total expenses you are expected to cover. Don’t get emotionally attached to a certain property until the negotiations are over. Emotional attachment might lead to you signing a contract your business can’t live up to.
After negotiations are finalized and you’ve made your selection now it’s time to have the landlord offer you the first draft of the commercial rental contract.
Now it’s time to reassess the commercial rental contract. It would be wise 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 certain lease items or want to propose new language now is the time to do so.
When the end of rental contract negotiations has finished the landlord will give you a copy of the lease to review and sign.
There are many more things to think about when leasing commercial real estate 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 leased 1 or 2 spaces then consider getting help from a tenant rep. Their services do not cost you anything and you’ll save a great deal of time and money.