This post was written by a guest contributor. Mark Casey, owner of Tenant Wisdom, has helped countless small business owners with their site selection needs throughout the greater Denver area. Tenant Wisdom is a commercial real estate broker specializing in tenant representation.
Seven Keys to Leasing Commercial Space
#1 Plan Ahead and Be Prepared. Business owners and managers consistently do not allow adequate time to find the space, negotiate the lease and build-out the improvements. The entire process (shown below) can take anywhere from four to 12 months. Assemble your team early and plan ahead. Create a package of non-confidential information on your company to share with prospective landlords. This will increase your negotiating leverage and remove unnecessary stress from the process.
#2 Get Sound Advice. As with a bank loan, a commercial lease is one of the most important agreements a business enters into. Commercial leases are complex documents, generally written to favor the landlord. In addition to getting the expert commercial real estate advice, consult with your CPA and get help from you attorney in negotiating the lease.
#3 Understand the Life-Cycle Cost of the Alternatives. The initial low-cost choice is frequently not the lowest life-cycle cost among leasing alternatives. Factors such as ‘free-rent’, tenant-improvement allowances, differential utility costs between buildings, CPI increases, and expense pass-throughs complicate the financial analysis.
#4 Use Options to Your Benefit. Options are a powerful tool which are frequently overlooked by the tenant in the haste to finalize a lease transaction. Beneficial options can include attractive renewal options, expansion options and even purchase options. When negotiated up-front, options frequently do not cost you, the tenant, anything, and can be of great value down the road.
#5 Evaluate the Landlord as if a Prospective Partner. The harsh but true reality is that the same landlord who is all smiles at the lease signing, can turn into the ‘landlord from hell,’ three months into a three-year lease. When you were being courted by the landlord, every concern was immediately addressed. But now that you are a tenant, if takes two weeks to get a return-call to report a roof-leak or HVAC problem. Know your prospective landlord.
#6 Integrate the Unquantifiable Factors into your Decision. How does a business owner or site manager place a value on the happiness of its employees? The answer is it is difficult, but must be considered in the leasing decision. In the Information Age the benefit of a happy, aligned team of employees dwarfs the cost of the brick and mortar which house them.
#7 Know Who is Representing Whom. If you found your broker by calling the number off the sign in front of the building you are interested in occupying, chances are excellent your are being ‘sold-to,’ not ‘represented’ in the transaction. ‘For Lease’ signs are placed there by the Landlord or her/his Leasing Broker. If you want your interests represented, work through a professional Tenant Rep.
To avoid the pitfalls of commercial leasing, get the space you want at the best price, follow these seven keys. Reach out to Mark directly here for additional advice.