Before you begin searching for the perfect warehouse space for your startup, you need to get informed about the commercial space leasing process. Being ready will keep you from making hurried decisions and costly mistakes thatyou will end up regretting in the future. Below are some insider tips to help make an informed decision when leasing a commercial property your company
Initiate the process of searching commercial space at least 6-12 months before your existing lease expires or before your perfect move-in-date. Finding the right space and negotiating the deal will require 1-2 months depending upon the size area and current market conditions. In most cases the spaces you like will need some type of improvements which the time needed will depend on the scope of work.
Thoroughly research your company’s current and future needs. Consult with the various department heads for input as well as some key employees.
Get familiar with the commercial space terms and meanings. Different landlords say and quote things otherwise. If you’re in doubt about what they mean don’t be afraid to ask them to supply more info.
If you’re not familiar with the commercial rental process or the current market conditions then consider engaging the help of a tenant rep. Their services don’t cost anything because landlords compensate all of the leasing fees. The landlord rep will have an knowledgable listing agent advising them so it would be a great idea for you to have one also.
Physically tour all of the properties that meet your requirements so thatyou can make a brief 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 about who owns the property, property amenities, required lease term length, how much the landlord is prepared to give in tenant improvement allowances, etc..
Don’t settle for the first commercial space you think is suitable for your requirements: continue searching until you have at least 2 to 3 alternative options. These additional options will work to your benefit because you will know what to expect during the lease negotiations and you will gain more leverage with numerous landlords competing for your company. They also give you something to fall back to whether the negotiations for your first choice go silent.
Send out proposals to your top three to five options. These are not legally binding. You don’t ever need to have a landlord agent’s verbal note. Everything needs to 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. Some of the things you should consider include the dimensions of this space, the inquiring foundation rental rates, the necessary lease duration, and the incremental costs (taxes, insurance, maintenance, etc). You can also take note about the advantages and disadvantages 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 eliminating those that 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 expenses then dividing by 12.
If any of the commercial spaces need tenant improvements then it’s 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 how much out of pocket you will have 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 return to each landlord to negotiate additional concessions. Make sure you fully 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 lead to you signing a contract thatyour business can’t live up to.
After negotiations are finalized and you’ve made your selection now it is time to have the landlord provide you the first draft of this commercial lease contract.
Now it is time to review 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 can review the lease with you also. Industrial lease language can be negotiated. If you don’t like particular lease items or want to propose new language today is the time to do so.
When the end of lease contract negotiations has ended the landlord will give you a draft of the lease to review.
There are several more things to consider when renting commercial space however these ideas will help get you started. If you’re a new company renting commercial space for the first time or an existing company who has just leased 1 or 2 spaces then consider getting help from a tenant rep. Their services don’t cost you anything and you will save a great deal of time and money.