Things To Consider Before Leasing Commercial Property

considerations leasing commercial propertyLeasing commercial property is much different than renting an apartment. A commercial lease contract is a complex document that is negotiable however typically heavily favors the landlord. There is a lot more to leasing commercial space than just finding a space. You have to know what you are doing to ensure success. If you don’t then hire someone that can level the playing field against the landlord and Landlords’s agent.

Below are a few things to consider before leasing commercial property.

Get your financials in order

Landlords are going to ask to see your financials when leasing commercial space so please don’t get offended when they do. It’s part of doing business. Before they agree to give concessions like tenant improvements they want to make sure you are financially stable. Many will ask to see these BEFORE they respond to your proposal or offer.

Ask the Landlord a Lot of Questions

It’s important that you understand who owns the building, who does the leasing, who the property manager is, etc… Here is a list of questions to ask commercial landlords or listing agent when touring commercial properties.

Ask Yourself the Right Questions

You need to understand your current and future needs so here are a few questions to ask yourself before leasing commercial property. For example How much space do you need now and within 12-24 months? Do you need room to expand? What is the maximum you can afford each month? What is the longest lease term you can sign? Don’t let the landlord talk you into to paying more than you can afford or signing a lease longer than makes sense for your business.

Get to Know the Lingo

As you talk to commercial real estate agents they are going to throw out a lot of commercial real estate terms and definitions. You need to be familiar with these so you can negotiate effectively and not make mistakes

Understand the Types of Commercial Leases

Some commercial properties are referred to as NNN leases, Gross, Modified Gross, etc. Do you know what this means? If not check out our post that talks about the different types of commercial leases.

How Long of a Commercial Lease Term Makes Sense?

The length of lease term in a commercial lease typically depends on the market you are in, the existing condition of the space, and the landlords preference. Landlords want you to sign as long of a lease as possible. If you are a new business then try to get a shorter term lease (less than 2 years). If you are a stable business then a 3-5 year lease makes sense. The longer the lease the more concessions you will be able to receive. The more improvements needed on a space the longer lease term the landlord will require so they can recoup their initial costs. At the end of the day you need to understand your current and future needs and agree to a lease term that makes business sense.

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