How to Avoid Common Commercial Real Estate Leasing Mistakes

Many business owners have discovered, albeit too late, that a commercial real estate lease is a binding document, regardless of what is discovered at a later date. The best thing that any business owner can do, to protect themselves and their businesses, is to learn from the mistakes of others of what to do and what not to do when it comes to a commercial lease.  Whether you are leasing retail, warehouse, or office space the following tips can help you save time and money!

Do Not Procrastinate!

When you were a child, your mother and your teachers often told you not to procrastinate. “Don’t put off till tomorrow what you can do today.” This piece of advice is crucial to commercial leasing success. Delaying looking for office space for your company and you potentially place your company in a lot of trouble, because you will be stuck in a place you do not want, or pay more for your space than necessary.

If you are looking for office space under 10,000 square feet, you should give yourself a minimum of six months to find the right place. You may need more if you cannot devote a lot of time to your search. This gives you the time you need to find the right location, negotiate and secure it at a good price, draft, review, and sign lease contracts, and make any renovations necessary to accommodate your business. If you require over 10,000 square feet, you should start at a minimum of nine months before you need to move or renew your lease.

If it is your intention to stay where you are, you should begin negotiations with your landlord at the six month mark. If you wait until the two month mark or less, your landlord knows that this is too short of a period for you to find a new place and will not be as willing to negotiate terms with you on your lease.

Determine Company Needs Prior To Search

One of the most important things that you should do as a company is determine your company needs prior to making a search for new space. You will need to ask yourself specific questions such as:

• What image does the company want to portray? This applies to interior and exterior appearances.
• What type of layout is necessary to be effective?
• Is there room for growth over the next 3 to 5 years (typical lease terms)?
• Is there a potential for downsizing and what will the extra room cost the company?
• Does the building have the technology access or electrical access we need to run efficiently?

Many businesses may want to call in a designer or architect at this point and help create a model floor plan for the business. This can be used to determine if any commercial space they find will fit the plans for the company.

Leasing the wrong size space for your company can cost you extra money when you pay for unused space or create havoc when employees are overcrowded.

Create A Lease Team

It is easy to assume that as a business owner you are very experienced and knowledgeable about running your company and your products or services. It is also easy to assume that you are not completely experienced in tenant leases. Landlords, however, are experienced in leases and know how to construct them to favor their bottom line. With this in mind, it is to your advantage to have a lease team that will help you negotiate the best deal.

Look for a tenant broker. A tenant broker can help you find ideal space more quickly and work as your negotiator for your lease. The broker will have experience in leases, markets, and trends, and will have knowledge about the different types of space that is available in the area you are searching. Take advantage of their knowledge and expertise.

Part of your lease team should also consist of a designer or architect. As stated above, they can really make the difference in you finding a space that you make do with, or finding the optimal space.

Due Diligence Is Crucial

When you are looking at a space to rent, you want to make sure that you check over everything prior to signing the lease. Check things like:
• Wiring and electrical outlets
• Internet access
• Air conditioning and heating units
• Lighting fixtures and switches
• Safety code compliance
• Americans with Disabilities (ADA) compliance

The last thing that you want to discover is that the building has outdated electrical and the safety inspector will not allow you to open until it is fixed. You then discover that part of your lease requires you to make any necessary changes to the space to keep it within code. Check first and either request that these changes are made as terms of signing the lease or move on.

Always Negotiate

Regardless of your company size or the size of the space you are looking to rent, you should negotiate the terms. In the United States, most commercial space is occupied with small businesses. Keep this in mind and make sure that you negotiate for your benefit for things such as tenant improvements, moving allowances, options for expansion, etc.

Landlords are looking out for their bottom line, not yours. So look over every part of the lease and look for ways that you could change it for your benefit. Things to look at are maintenance costs on things like the HVAC system or options for subleasing portions of your space if you are not using them. Every little thing you change in your favor is a bonus for your company.

Do Not Be Trapped By Price

There are two sides to a budget for office space. For some, they only use the cost of the space as their guideline, often missing out on large opportunities for exposure to new clients and growth because the cost of the space was a little over budget. While it is important not to overspend on space and cause your company financial harm, do not overlook a space that may be a little more expensive if it poses advantages for your company that you could not get in another location (e.g. employee retainment, recruitment, client image, walkable amenities, employee productivity, natural lighting, etc.)

Stay Disciplined

The most important thing to remember is that you must stick to your plans for the most part and remain disciplined. Getting frustrated or being in a hurry will cause more damage to your company than staying true to your goals.

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