Before you begin looking for the perfect warehouse space for your small company, you must to get educated about the commercial real estate leasing process. Being prepared will help prevent you from making impulsive decisions and costly mistakes thatyou will end up regretting in the future. The following are some insider tips to help make an informed choice when letting a commercial real estate your business
Start the process of locating commercial space for lease at least 6-12 months before your existing lease expires or before your ideal move-in-date. Locating the perfect space and negotiating the deal will require 1-2 months depending on the size area and current market conditions. In most cases the spaces you like will need some type of tenant improvements which the time needed will depend on the scope of work.
completely examine your business’s current and future needs. Consult with the different department heads for input in addition to some key employees.
Get acquainted with the commercial property terms and definitions. Different landlords state and quote things differently. If you are in doubt about what they mean don’t be afraid to ask them to provide more information.
If you are not familiar with the commercial rental process or the current market conditions then consider engaging the support of a tenant representative. Their services don’t cost you anything since building owners compensate all of the leasing commissions. The landlord agent will have an professional listing agent advising them so it would be a great idea for you to have one also.
Personally tour all of the spaces that meet your needs so thatyou can make a brief list. Keep in mind that the layouts can be reconfigured so don’t get stuck on that. Ask the landlord agents a great deal of questions regarding who owns the property, 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 properties you think is suitable for your needs: continue searching until you have at least two to 3 alternative options. These additional options will work to your advantage because you will know what to expect during the lease negotiations and you’ll gain more leverage with numerous building owners competing for your company. They also give you something to fall back to whether the negotiations for your first choice go silent.
Send out proposals to your top three to five options. These aren’t legally binding. You don’t ever want to take a landlord agent’s verbal note. Everything should 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. Some of the things you should consider include the dimensions of the space, the asking 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 calculating the monthly base rents for each property then removing those that are way over your budget. The monthly base rent is calculated by multiplying the industrial space square feet from the asking base rate plus any operating expenses then dividing by 12.
If some of the commercial properties need changes then it’s important that you determine what improvements you want on each and get construction bids. That way if the landlord is offering a tenant improvement allowance you will know 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 each 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 result in you signing a contract thatyour 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 lease contract.
Now it is time to reassess 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 today is the time to do so.
Once the end of lease contract negotiations has finished the landlord will give you a draft of the lease to review.
There are many more things to consider when leasing commercial real estate however these ideas will help get you started. If you are a new business leasing commercial property for the first time or an existing business who has just 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 lot of money and time.