Finding commercial space to rent for your business is necessary, but it's not the easiest thing to do. For one, commercial real estate listings are not all listed on one MLS site. There are dozens of directory sites such as Loopnet, but most of the data is out-of-date, inaccurate, or incomplete, making it difficult for companies to get a clear picture of what's available and if it meets their needs.
So how do you find commercial space for rent?
As with any commercial lease decision, you should weigh the pros and cons of the types of space, locations, sizes, lease options, and amenities you are considering.
Before you begin the search, make a budget and put some time and effort into the effort required to find commercial property for lease.
You'll need a good credit history to be able to get approved for a commercial lease at all, and the landlord may have additional qualifying requirements to approve your tenancy.
Types of Commercial Property
First you will want to determine the type of commercial real estate your business needs to rent. Knowing the type of commercial property that will meet your needs is important as some areas zoned for commercial use may have certain restrictions on the type of business that can operate.
Zoning laws, approved uses, locations, etc. may impact the services you are able to offer, the parking, accessibility, the size, and other factors.
Commercial buildings include:
- office buildings
- Industrial real estate such as warehouse & distribution centers
- retail stores and restaurants
- medical space
In some locations a commercial property can have multiple functions such as office and warehouse, or retail on the first floor and office space on floors 2 and above.
Factors to Consider When Choosing a Location
Commercial Zoning & Uses
It's important to ensure that the commercial property is zoned for commercial use which includes the rental, sale, distribution, and servicing of goods.
Most cities have zoning districts and map codes to reserve areas for certain commercial uses that are compatible, convenient for residents, and ensure parking and access, minimize traffic congestion, and ensure high standards for commercial buildings. They also protect areas from uses that are not compatible with each other.
Example of Commercial Use Classifications
- Administrative and business offices
- Business or trade schools
- Cocktail lounge
- Consumer convenience services
- Consumer repair services
- Food preparation
- Food sales
- General retail sales
- Indoor sports and recreation
- Liquor sales
- Medical offices
- Personal services
- Professional office
Examples of Industrial Use Classifications
- Custom Manufacturing
- General warehousing and distribution
- Light manufacturing
- Limited warehousing and distribution
Examples of Commercial base districts
- NO – Neighborhood office
- LO – Limited office
- GO – General office
- CBD – Central business districts
- CS – General commercial services
- CS-1 – Commercial liquor sales
- W/LO – Warehouse limited office
- IP – Industrial park
- LI – Limited industrial services
- R&D – research and development
For users renting retail space and restaurant space it's important that you consider the target audience. You want to be near your ideal customer base based on what you sell and serve. Taking into consideration your price range is key. For office users maybe you want to be near key partners, employees, amenities, or other conveniences.
You want your location to be easy to find and easy access for your customers, employees, partners, etc.. Is it important for you to be near the airport, major highways, public transportation, or in a high foot traffic area? What is the parking situation?
Make sure there is enough parking for your customers and employees. All commercial properties have parking ratios that they have to adhere to. In most cases you will be allotted 3-4 parking spaces per 1,000 square feet that you lease.
Retail and medical office buildings will typically have higher parking ratios.
Physical Structure and Technology
Does the property have the size, electrical power, and telecommunications that you need? What if your a new business that can only consider fiber lit buildings? How much space is there for growth?
If your looking at industrial properties do you need them to be 18 wheeler accessible? Do they have the loading you need? Are the ceiling heights tall enough?
You want to make sure you can rent commercial space without having to make major modifications.
Be sure to research what other types of tenants occupy the properties that you are searching for space in. Are they in the same industry as you? If so is that good or bad. Some businesses like to be near the competition while others not so much.
If you're leasing retail space there is a good chance that a competing business negotiated an exclusive clause in their commercial lease which means no other tenants in a similar industry can lease space at that location.
Lease Term Length
Most landlords are going to push for a minimum of a 3-5 year lease, especially if tenant improvements are involved.
If you are a new business not sure about the future you and your broker should search only for properties that can accommodate a shorter term. If your company is established and more confident about the future then you can negotiate listings that require longer contracts.
Commercial Rent Costs
Be realistic about how much rent your business can afford each month.
If you want to save a ton of time hire tenant representation broker to represent you in your search as they can show you all the locations within your budget.
If you are doing the search on your own it will take some time but you have to learn the market in the city your in and get to know average gross lease rates in different areas of town. In Austin Tx for example downtown and Domain will typically have the highest rent. Other areas such as Northeast and Southeast Austin will have the lowest rental rates.
When comparing each building on an apples to apples basis be sure to account for all possible expenses (e.g. base rent, taxes, insurance, and common area maintenance fees, utilities, janitorial, tenant improvements, signage, etc.).
Find space in a location with a good landlord. Search the internet to see if they have any pending foreclosures. Talk to other tenants about their experience in the building. Is the property management company responsive to their needs? Is the property maintained well?
Determine Your Commercial Real Estate Needs
How Much Commercial Space?
The size commercial space depends on your use. Below are a few examples
- Average Office Size – 150 to 250 sf per person
- Restaurant – spaces range from 12-15 square feet per customer
- Health & Fitness Services (small) – 1200 to 4000 sf
- Pizza Store – square footage range of 1000 to 2500 sf
- Eye Care – 1000 to 3000 sf
- Fast Casual – 1500 to 2500 sf
- Quick Service Restaurant (QSR) – 1400 to 3000 sf
- Nail Salons / Hair Salons – 800 to 1500 sf
- Wine / Liquor (small) 1200 to 2500 sf
- Dry Cleaners – 1000 to 2500 sf
- Industrial and warehouse space – click on this link
Commercial properties can differ in the building features and amenities offered. The more amenities a property has the more expensive it may be. You must decide which ones are most important to your business. Below are some examples by property type.
- Fitness Center
- Building conference room
- Onsite deli
- Outdoor areas
- Building Wifi
- Tenant lounge
- Bike Storage
- Covered parking
- Building signage
- 3 phase power
- Grade level or dock high loading
- HVAC in warehouse
- Overnight parking for trucks
- Ceiling height above 28 feet
- Truck court big enough for 18 wheeler access
- Onsite Security
- Larger overhead doors
- Triple Freeport Tax Exemption
Get To Know the Different Commercial Lease Agreements
Triple Net Lease (NNN)
This is the most common lease payment structure used by landlords these days. If they haven't already most landlords are moving towards this.
In a triple net lease the tenant pays a base rent per square foot that mostly like will have yearly escalations of 3-5%.
In addition the tenant will pay the their pro rata of the NNN which are the building property taxes, insurance, and common area maintenance charges.
Full Service Commercial Leases
Also known as a Gross Lease in which the tenant pays an all inclusive rental rate.
The building owner pays for all the building expenses including utilities, property taxes, insurance, property maintenance, and any common area expenses or security costs.
Common Terms a Commercial Lease Should Include
- Property and General Liability Insurance – Landlords will maintain a policy on the building and Tenants will maintain a policy on their contents. Commercial leases should spell out who is responsible for liability insurance and what each will cover
- Property Improvements – Is the Tenant or Landlord paying for improvements? Is the landlord paying for the improvements out of their pocket or amortizing into the rent payments?
- Repairs and Maintenance – Who is responsible?
- Security Deposit – What is required? How will it be returned?
- Renewal Term – Does the tenant have the option to renew? Will the lease automatically renew at the end of the lease?
- Sublease – Does the Tenant have the right to sublet the space?
Ways to Find Commercial Property
Search the Internet
Over the years many different sites have popped up that contain commercial property listings such as Loopnet, Crexi, commercialcafe, propertyshark, commercialsearch.
As mentioned earlier much of the data you will see on these sites is outdated or inaccurate, however they can be a good place to start to help give you a general idea of what may be available in the market.
Talk to Other Business Owners In Your Desired Building or Area
Find out from other similar businesses if they know of any available spaces in their building, what their landlord is like, what full service lease terms and lease length to expect, and what office costs to expect from landlords.
Drive Around Markets of Interest and Call on For Lease Signs
It's possible to find commercial property by driving around calling on for lease signs however this will take up a lot of your time and most landlord brokers get too busy to return phone calls promptly.
After doing so however you will have a a better understanding of the commercial real estate market and particular neighborhoods that your new business might be interested in.
If your going to do this it's good idea to drive your favorite areas in the morning, afternoon, and evenings on a few different days to get an idea of traffic patterns.
Keep in mind you may have a hard time getting call backs from landlord representatives.
Hire a Commercial Real Estate Company that Specializes in Tenant Representation
The best way to find commercial property is to hire a tenant representative that specializes in the type of commercial property that your business needs to lease.
Commercial tenant reps are brokers that do all the legwork of finding the best location for businesses and negotiating against the landlord to get the lowest lease rate and best commercial lease terms possible.
The cost to use them is zero since the landlord pays their fee. You get your own commercial real estate broker that represents your best interests in the search, selection, and negotiation of commercial real estate.
Using them does not have a negative effect on the deal you get. In fact they can help save you money since they know what deals are possible in a given market.
Full commissions are paid regardless of whether you have help or not so you might as well put them to use.