How to Find The Best Commercial Space For Your Business
There are many types of commercial spaces that you can rent and many things to consider before signing a lease. The type of space you rent can affect the type of lease, the price per square foot, and the wrong location can hurt your business, while the right type of space and location can help your business to grow.
- What Types of Commercial Properties Can Businesses Lease? Should you rent space in a business park, industrial park, or retail location? Different types of commercial real estate properties all have pros and cons. Learn how to determine what type of space it makes the most sense for your business.
- Commercial Industrial Spaces - Things to Consider When Leasing: Commercial industrial space can also be used in place of traditional commercial office space, usually at substantially cheaper prices. There are pros and cons, advantages and disadvantages to leasing commercial industrial space.
Do Some Homework Before You Look at Space
Before looking at business space make a checklist that details and ranks your needs and priorities before you see any space. It is easy to get excited about how a space looks and overlook drawbacks. An experienced landlord or realtor will pick up on your enthusiasm for a particular space and may hard-sell you to make a quick decision or be less flexible in negotiating lease terms.
Having a checklist of questions to ask about the lease is also important because commercial leases can be very complicated. A checklist of leasing questions will help you remember what to ask so that you will have enough information about the terms to research more about the type of lease being offered to you.
- Checklist for Leasing Commercial Office, Retail, and Industrial Properties: When it comes to selecting a location for your business you need to think things through. Make a checklist before looking at commercial spaces of all the things that your business needs to succeed and take it with you. If you have not already written a technical feasibility study, consider doing so. A technical feasibility study can help you think about, plan, and address all the needs of your business that need to be considered when leasing commercial business space.
- Glossary of Leasing Terms and Definitions: Before you start tackling commercial leases, take time to become familiar with basic leasing terminology. For example, it is important to know the difference between "usable square footage" and "rentable square footage." In most commercial leases, you pay for more square footage than you actually occupy.
- How to Write a Technical Feasibility Study: Writing a technical feasibility study can help you thoroughly consider and plan for all your present and future business needs when it comes to the space you need.
Types of Commercial Leases and Common Leasing Terms
- Types of Commercial Leases: Compare the types of commercial leases commonly used in commercial real estate in an easy-to-read chart.
- The two most common ways to lease office and other commercial spaces include:
- Lease: In a standard tenant-landlord lease you are the main business (or individual) named on a lease with the landlord.
- Sublease: A sublease is when an individual or other business already has a lease with a landlord, but subleases (rents out) a portion of the space their space to you. Sublessors cannot transfer rights to sublessees that are not in the original lease or if the original lease prohibits subleases.
Understanding and Negotiating Commercial Real Estate Leases
Commercial leases are complicated and are very different from residential leases. Before signing any commercial lease you need to know what questions to ask, and how to rent, load fees and other added fees are calculated. Armed with knowledge you can negotiate the best deal possible!
Women are just as capable of negotiating a good deal in commercial leases as men are but negotiating starts with asking the right questions.
Once you have answers to certain questions, you can research more about types of leases, leasing terms, negotiating commercial leases. You will also be better able to plan your finances, and your negotiation strategies if you know what questions to ask.
- Question #1: What Type of Commercial Lease is Being Offered? The type of lease being offered is probably the most important thing to consider first because it determines how you will be charged rent. The terms of commercial real estate leases are defined by the type of commercial lease.
- Question #2: Are the Terms of the Lease Negotiable? All commercial leases should always have at least some room for negotiation, no matter how small. A completely inflexible landlord is generally not someone you want to lease from because "inflexible" often equates with "unreasonable."
- Question #3: What Insurance Coverage Does the Lease Require Tenants to Purchase? Few business owners new to commercial leasing will look beyond their actual monthly rent and utility costs when determining if a space is affordable, but you also need to consider your insurance costs. Moving from a home-based business into "brick and mortar" space will cost you more to ensure your business because, in addition to your own insurance needs, your landlord will probably require you to purchase insurance to protect him/her as well.
More Questions and Considerations Before Signing a Commercial Property Lease
Terms You Need to Know to Understand Commercial Real Estate Leases
When you rent commercial space, you will often be paying for more than the actual square footage you will be occupying. A landlord can easily take advantage of someone who does not understand the difference between a Triple Net Lease (NNN Lease) and Double Net Lease. While the difference may not sound like much, and NNN lease is the worst kind of lease for any tenant to sign as it almost always favors the landlord.
Here are articles that will not only explain the different types of leases, but that also explains how rent and added costs, like Common Area Maintenance (CAM) fees are calculated:
- Square Footage Formulas Used in Calculating Commercial Lease Rents: Why The Space You Occupy is Not All That You Pay For
- Common Area Maintenance (CAM) Fees in Commercial Leasing: 101
- Commercial Leases - Square Footage Used in Calculating Commercial Leases
- Average Percentage Rents Charged in Commercial Leases
How to Negotiate the Terms of a Commercial Lease
Once you have found the perfect space, you still need to make an offer, and sometimes a counter offers to negotiate the best deal on a commercial lease. Never accept any offer without asking for at least something better. It is standard and customary in commercial leasing to negotiation - the landlord expects it and usually will inflate rent or fees in some way expecting to come down a bit in price.
- How to Negotiate CAM Fees in Commercial Leases: Common Area Maintenance (CAM) fees are dreaded by most tenants, and misunderstood by even more. But CAM fees are often negotiable. The larger the space you rent, the more likely you will be able to negotiate CAM fees and any associated administrative fees. However, no matter how small the space is, never accept the terms of any lease without asking for a better deal.
- Get Initial Asking Terms in Writing: If a landlord or leasing agent simply tells you the terms, ask for something showing the terms in writing before you submit a counteroffer. If they are reluctant to offer a letter, ask for an email or a copy of the listing for space (which will contain at least the basic leasing information).
- Preparing An Offer or Counter Offer Letter: A counter offer should be presented from your business, not from you personally, even if you own a sole proprietorship.It is helpful to remember that an offer letter is a sales pitch. You are asking for different terms than what was presented to you - terms that are more in your favor and you want the landlord to see you and your business as a good choice worthy of concessions.
- Listing Your Leasing Terms in an Offer or Counter Offer: There are some key things you should include in the terms of your offer. For example, you want to make clear the rate you will pay, the length of the lease, renewal options, as well as list any build-outs or improvements that you want the landlord to do, or, that you will do once you move in, and, when you will move in.
- If you need help preparing your offer letter, Women in Business has a Sample Offer Letter that you can refer to as a guideline for putting your terms into writing.
Putting it All Together
Looking for space should be exciting and fun, not scary. Do not be shy about taking notes, measurements or pictures of any space you look at. These things can help you research and compare more options after you leave the site.
Perhaps the two most important things to remember are almost all leases are negotiable in some way, and, commercial leasing is complicated and landlords expect you to ask a lot of questions. In fact, when it comes to leasing, the more questions you ask, the more likely a landlord is to deal straight with you.
Asking questions and being assertive will help you get the best deal. And when it comes to signing the actual lease, if you do not understand something, it pays to get a lawyer or trusted realtor to explain the terms to you.