Image by F. Muhammad from Pixabay
Depending on your locale, commercial real estate is either readily available or hard to find.
Either way, it requires due diligence and skills to negotiate the best commercial real-estate lease.
Here are 11 tips:
1. Location, location, location
Businesses have different priorities in leasing space. What are your location requirements?
Some businesses need to locate as near as possible to their customers.
Temporary help firms need to be accessible to their potential temporary workers. Restaurants need to strategize for the driving convenience of the patrons.
In an interview with The New York Times, I gave suggestions that were published in Advice on Taking an Entrepreneurial Leap.
2. Due diligence
Research the average costs for commercial space that meets your needs. You can get the necessary data for your area. You can also visit www.cityfeet.com or www.LoopNet.com.
Develop a checklist of your necessities and prioritize them A, B or C.
3. Assess your necessities
What do you need in access to streets and highways, infrastructure, parking, space, storage and utilities? Develop a checklist of your necessities and prioritize them A, B or C. This becomes your wish list in terms of your priorities.
4. Consider professional input
While real estate pros actually work for the landlords by whom they’re paid commissions on the value of each lease, they can still be a good source of information. It might also be wise for you to get a commercial real estate lawyer to help you understand the fine print and in the negotiation process.
5. Research the costs
There can be common-area maintenance or CAM costs, garbage collection, insurance, property taxes, repairs, utilities and rental rates to consider. Annual rates are usually quoted for urban office space and monthly rates for industrial and retail space.
In retail space, landlords often calculate their base rental rate and add an additional charge — a percentage of your retail gross income.
You might be expected to pay costs directly or pay the landlord.
6. Know the zoning restrictions
There are city ordinances, zoning regulations or laws to keep in mind. Beware as they can have a big effect on your business.
7. Discuss and negotiate necessary improvements
It’s common for property to be remodeled to suit your needs. Know what is possible, your costs, who will manage the work, and whether you’ll be expected to restore the space to its original condition when you move.
You might want to sublease some of the space to save your cash flow until your business expands.
8. Subleasing
You might want to sublease some of the space to save your cash flow until your business expands. So inquire about subleasing and whether you’ll be allowed to rent some or all of the space to another party. You want to avoid legal hassles — being accused of breaking the lease — if you have to suddenly move.
9. Investigate timing contingencies
What is your growth potential? For the most convenience in flexibility, consider a short-term lease with options to renew with a guarantee of no rent increases. In this way, you’ll be able to move if enjoy faster-than-expected growth. Otherwise, a long-term lease usually gets you the best terms.
10. Have your checklist of priorities before leasing
Refer to your priority checklist before approaching a landlord. Keep it handy. Write down your questions and concerns. Get all terms in writing. Carefully study them and show them to your lawyer.
Be patient. Sometimes, it’s necessary and an acceptable practice to make a counter offer — in writing.
11. Be assertive
Don’t be shy about asking for you want. Depending on your locale and situation, you might have more negotiating power than you think.
From the Coach’s Corner, here are related tips:
Due-diligence Tips to Pick the Best Business Location — Whether you’re an established business looking to move or you’re a new entrepreneur looking for your first location, it can be a stressful process. Therefore, it’s important to adequately plan in order to alleviate the impact of such a stress factor. If you’re stressed over a move, you’re not alone.
Finance – Managing Hidden Evergreen Clauses for Your Benefit — A big frustration for businesspeople in financing and leasing business and commercial equipment comes after they fail to read the fine print in contracts. Commonly found in financing and leasing contracts, evergreen clauses are designed to keep customers committed to an agreement beyond the original term.
“The best move you can make in negotiation is to think of an incentive the other person hasn’t even thought of – and then meet it.”
-Eli Broad
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