What to ask before leasing a commercial space?
When searching for a commercial space as a business owner you must take some time to develop a plan of action for your space needs. I can't tell you how many times I have met with competent, intelligent business owners who had no basis for their real estate search. As a commercial broker this can be a frustrating experience as the results can be lost time, effort and energy for you and your client. That is why I put together a list of questions I use to help my clients think about their space need requirements before we start our search.
Question 1: Do I really need a commercial space?
I know this one seems a bit juvenile, but you would be surprised about how many businesses I have encountered that didn’t even know for certain that a commercial space was a necessary expense, this is particularly true when you work with startups.
Question 2: Is the location of my commercial lease space important?
Location! Location! Location! That old adage really rings true on this one. As a business owner you must understand what is important to your businesses' success. If location is not a necessity for your business to operate effectively that is important to know as a prime location will typically demand a higher price.
Question 3: What is my budget for a commercial lease space? Is it reasonable and realistic?
Another thing you’ll want to determine is your maximum monthly budget. This will help you limit your searches to only spaces that you can afford. You need to ensure that your maximum budget is a comfortable amount over a multiple year period as commercial lease typically span several years. You’ll want to include expenses for any expected construction, rent increases, and potential landlord operating expense increases. The cost of construction will vary from space to space, building to building and are largely dependent on your type of business. It is possible to get the landlord to contribute to some or all of the construction costs depending on your credit worthiness and years in business. As for rent increases and landlord operating expense increases we will cover more about those in future blog post.
Question 4: How much commercial space will I need today and 3-5 years in the future?
The commercial lease options available are largely dependent on the size and layout of the space you need.
Plan your space needs for the next several years. How many employees will you hire? How many parking spaces will you need? If you’re growing quickly, you may want to sign a short-term lease or look for a space with expansion possibilities. If you are confident in your size and location needs, it may be in your best financial interest to sign a longer lease to increase your ability to negotiate.
Question 5: Who is important to be involved in a commercial lease space decision?
Before jumping in headfirst, as yourself who inside and outside of your organization needs to be included in your decision making. I would obviously advocate for the use of a seasoned commercial real estate professional, but you need to consider others like your partner, CFO, operations manager, production manager, HR, attorney, banker, etc. A good commercial real estate professional will be knowledgeable about your local market and may even know about available properties that are not listed for lease yet or built to the specifications you require. You should make sure your agent is familiar with the special requirements of your industry or organizations so they can become a partner in the success of your business.
There are several important factors to consider before making a commitment to a commercial lease. Finding the right commercial professional is key to getting the process started. Contact us at Trestle Partners to assist you with the appropriate steps to find a commercial property for lease or sale. Also, stay tuned for the next installment of our 5-part blog series titled " Understanding Lease Agreement Structures and Options".