There are many aspects of running a small business that can be challenging – finding and leasing commercial real estate space that meets your current and future needs and budget is definitely one of them.
Unless you have commercial real estate experience you may not understand the market or understand how to negotiate rates and terms like a professional. The good news is that a tenant representative can help you! Even if you are not planning to lease new space or relocate right now getting educated and planning for the process ahead of time is a good idea.
There is a lot of confusing information out there so to make finding and leasing commercial real estate space less challenging we have written this handy guide to help navigate you through the process.
Calculate how much commercial space you need and where you need it
It’s not easy to determine how much commercial space you need as the general rules have changed. These days most companies are leasing about 150 sf to 200 sf per person. Depending on the building, parking situation, and layout of the space (e.g. open office) you can sometimes do a little less per person. We have also created this handing office space calculator to help you estimate your space needs. The key to determining how much space you need is to make sure you factor in your current AND FUTURE needs. The last thing you want to do is lease a space and then run out of room 6 months later.
From a location perspective you need to think about your employees, clients, vendors, nearby amenities, etc. You don’t want to lease a commercial space that requires your employees to drive 1 hour each way to work. You also want it to be close to restaurants and other conveniences so the employees can easily and quickly get lunch or run errands. From a client perspective you want to think about the image you want them to have and make it easy for them to find your place of business. With retail space visibility is VERY important
Survey the market for suitable options
Now that you know how much commercial space you need and where your ideal location is now you are ready to learn about the market and evaluate your options. A good tenant representative can help you navigate this process. You want to physically tour each building and space, ask the landlord lots of questions, and take notes. Compare each property based on the tangible and nontangible aspects. Have your advisor create a spreadsheet that compares each property on an “apples to apples” basis.
Create a short list of your favorite options
Now that you have surveyed the market narrow down your choices to your top 3-5. Review the spreadsheet and compare each based on price, location, amenities, services, and other factors. You also want to compare the landlords based on how well they maintain the properties and take care of their tenants. Your tenant representative should have a lot of feedback on each property and landlord based on their experience in the market.
Draft and present Requests for Proposals (RFP’s)
Now that you have narrowed down your options have your tenant representative draft and present RFP’s to each of your top choices. Once you have responses then input all that information on the spreadsheet and compare each one side by side. Thoroughly review this lease analysis and compare each property based on the monetary and non-monetary aspects.
Negotiate with landlords
Negotiating commercial space deals can be stressful however it’s necessary for creating terms and conditions that both parties can agree to . With the right team in place and after having done your homework you will be prepared for success. I highly recommend you hire a good commercial real estate attorney experienced with commercial leases in your area. If you have a tenant representative they will be able to help guide you through the process to ensure that no mistakes are made and that you get the best possible terms.
Customize your new commercial space
If necessary you will need to have a space plan created and have a contractor finish out your new space so it meets your required look and feel. It’s possible that the previous layout will meet your needs however more than likely the space will need some sort of modifications. In most cases at a minimum it will need new carpet and paint. Depending on the type of space and market you can usually get the landlord to provide a tenant improvement allowance to help cover some of these costs. Your advisors will be able to help you navigate this process as well.
This handy guide has a lot of useful information however keep in mind it’s just the tip of the ice burg. There are a lot of other details and information that you will want to consider when searching for and leasing commercial space. Having a good team in place such as a tenant representative can help you with this process and ensure that you save time, money, and avoid costly mistakes.