Before you start looking for a great wine tasting in Sonoma for your business, you need to get informed about the commercial space leasing process. Being ready will help prevent you from making expeditious decisions and costly mistakes you will probably regret in the future. Below are some insider tips to help make an informed decision when leasing a commercial property your business
Initiate 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 area and current market conditions. In most cases the spaces you like will need some type of improvements that the time needed will depend on the scope of work.
Thoroughly analyze your business’s current and future needs. Consult with the various department heads for input in addition to some key employees.
Get familiar with allthe commercial property terms and definitions. Various landlords state and quote things otherwise. If you’re unsure about what they mean do not be afraid to ask them to get more info.
If you’re not familiar with the commercial rental process or the current market conditions then consider engaging the assistance of a tenant representative. Their services do not cost anything because landlords compensate all the rental commissions. The landlord agent will have an expert listing agent helping them so it would be a good idea for you to have one also.
Personally tour all the spaces that meet your needs so you can make a short list. Keep in mind that the layouts can be reconfigured so don’t get stuck on that. Ask the landlord agents a lot of questions regarding who owns the property, property amenities, required lease term length, how much the landlord is prepared to give in tenant construction allowances, etc..
Don’t settle for the first commercial properties you believe is suitable for your needs: continue looking until you have at least 2 to 3 alternative options. These extra options will work to your advantage because you will know what to expect during the lease negotiations and you’ll gain more leverage with multiple landlords competing for your company. They also give you something to fall back to whether the negotiations 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 take 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 need to put into consideration include the size of this space, the asking foundation rental rates, the necessary lease term, and the incremental costs (taxes, insurance, maintenance, etc). You can also take note about the pros and cons of each property. If you’re 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 above your budget. The monthly base rent is calculated by multiplying the commercial space square feet from the asking base rate and any operating expenditures then dividing by 12.
If some of the commercial properties need changes then it is important that you figure out what improvements you want on each and get preliminary bids. This way if the landlord is offering a tenant improvement allowance you will learn just how much out of pocket you’ll need to pay above and beyond what the landlord is prepared to give.
Carefully analyze and compare the terms of each proposal. Consider whether it makes sense to go back to each landlord to negotiate additional concessions. Be sure you completely understand the total expenses you’re expected to cover. Don’t get emotionally attached to a specific property until the negotiations are over. Emotional attachment might result in 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 provide you the first draft of this commercial rental contract.
Now it’s time to review the commercial rental contract. It would be wise for you to hire an attorney to review the lease. For those who have a tenant representative then they could review the lease with you as well. Commercial lease language could be negotiated. If you do not like particular lease items or would like to propose new language now is the time to do so.
Once the end of rental contract negotiations has finished the landlord will provide you a copy of the lease to review and sign.
There are several more things to think about when leasing commercial real estate however these tips will help get you started. If you’re a new company leasing commercial space for the first time or an current company who has just rented 1 or 2 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.