Before you begin searching for a great warehouse space for your startup company, you need to get educated about the commercial property leasing procedure. Being prepared will keep you from making rapid decisions and costly mistakes you will come to regret in the future. The following are some insider suggestions to help make an informed decision when renting a commercial property your business
Initiate the process of searching commercial space at least 6-12 months before your existing lease expires or before your ideal move-in-date. Finding the correct space and negotiating the deal will require 1-2 months depending upon the size space and current market conditions. Typically the spaces you like will need some type of improvements that the time required will depend on the scope of work.
completely analyze your company’s present and future needs. Consult with the various department heads for input as well as some key employees.
Get acquainted with allthe commercial property terms and meanings. Various landlords say and quote things otherwise. If you’re in doubt about what they mean do not be afraid to ask them to get more info.
If you’re not familiar with the commercial property leasing process or the present market conditions then consider engaging the support of a tenant representative. Their services do not cost you anything because building owners pay all of the leasing commissions. The landlord representative will have an knowledgable listing agent helping them so it would be a great idea for you to have one also.
Physically tour all of the properties 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 reps a lot of questions about the ownership, property amenities, required lease duration, how much the landlord is willing to give in tenant improvement allowances, etc..
Don’t settle for the first commercial space you think is acceptable for your needs: continue looking until you have at least two to 3 other options. These extra options will work to your advantage 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 negotiations for your first choice fall through.
Send out proposals to your top three to five options. These aren’t legally binding. You don’t ever want to have a landlord agent’s verbal word. Everything should be in writing.
To help you decide what property is best suited for your company, prepare a spreadsheet to do an apples to apples comparison of every property. Some of the things you need to consider include the size of this space, the asking base rental rates, the required lease term, and the incremental expenses (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 calculating the monthly base rents for each property then eliminating those which are way above your budget. The monthly base rent is calculated by multiplying the industrial space square feet by the asking base rate plus any operating expenditures then dividing by 12.
If some of the commercial spaces need changes then it is important that you figure out what changes you want on each and get preliminary bids. That way if the building owner is offering a construction allowance you will learn just how much out of pocket you’ll have to pay above and beyond what the building owner is willing to give.
Carefully examine and compare the terms of each proposal. Consider whether it makes sense to go back to every landlord to negotiate extra concessions. Make sure you fully understand the total expenses you’re 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 cannot 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 lease contract.
Now it’s time to reassess the commercial lease contract. It would be wise for you to hire an attorney to review the lease. If you have a tenant representative then they could review the lease with you also. Commercial lease language could be negotiated. If you do not like particular lease items or want to propose new language now is the time to do so.
Once the end of lease contract negotiations has finished the building owner will provide you a draft of the lease to review and sign.
There are several more things to think about when leasing commercial real estate however these suggestions will help get you going. If you’re a new company leasing commercial property for the first time or an existing company who has just leased 1 or two spaces then consider getting help from a tenant representative. Their services do not cost you anything and you’ll save a lot of money and time.