10 Questions All Tenants Must Ask When Leasing Commercial Real Estate

lease commercial real estateIf you plan on acquiring office, retail, or warehouse space you will more than likely lease or rent so it’s important to prepare yourself for negotiations with a commercial landlord.  I have been representing tenants for over 11 years and have come up with the top questions that all tenants must ask when leasing commercial real estate whether for a new or second location.  By doing so you will better protect your interests, your investment, and yourself.

Who is the Building Owner or Landlord?

You will either be dealing with an individual owner, a bank, or a large investment group.  Each one requires a different negotiation approach.  For example a mom & pop owner may not care so much about “market” rental rates as a real estate investment trust.

How Long Has the Landlord Owned the Property?

If they have owned the property for a while their basis (the price they paid) is probably lower so can get away with lower rents.  If they just purchased the building in a high market they will have to get higher rents to justify the mortgage.  A long time owner may have more interest in maintaining the property as well.

Where is the Landlord Located?

If they are local they maybe more accessible and easy to work with.  Out of town owners may not be as available when you need them for important matters.  Getting them to approve work or respond will take longer.

Is the Property Manager Local?

Same situation as above.  If they do not live in your city it maybe difficult or take longer to get things accomplished.  Some may manage multiple properties and may travel quite a bit.

What is the Building History?

Older buildings will eventually need more maintenance and repairs which may cause operating expenses to increase.  Does the property have high turnover?  If so that could be a red flag.  Have any other tenants with a similar use are yours leased space here in the past 3-10 years?  If so why did they leave?

Who is the Listing Agent?

You want to know who you are dealing with as it will help you prepare for negotiations.  Do they work for a big commercial real estate firm or are they a family business or independent agent?  Commercial agents can only tell you what the landlord allows them to share.

Who Were the Last Few Tenants to Move In?

It doesn’t hurt to reach out to them and ask them how their leasing process went & what has been their experience so far.   Push the listing agent for details.

Who Were the Last Few Tenants to Leave?

Whey did they move out and when?  Where did they move to?  Find out who they were and approach them to find out the “whys” and their opinions of the landlord, property manager, and the property.

Who is the Largest Tenant?

How long have they been there and are they planning on staying?  If your renting retail space you will want to know this because the largest tenants (anchor tenant’s) typically drive the most traffic to the location so you want to know if they are staying or not.

Is the Building Listed For Sale?

Investors and owners of commercial real estate have different objectives with potential tenants.  You also want to keep in mind that you may not like the new owner.

You might feel uncomfortable to ask these questions however keep in mind that the landlords are generally open to answer them.  As a tenant you have the right to know the full picture.  If you have any questions don’t hesitate to contact us: https://www.austintenantadvisors.com/ or 512-861-0525

 

 

 

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