Jan 14, 2015

When to Start Looking for Your Next Commercial Real Estate Lease

By Don Catalano

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Commercial Real Estate LeaseTypically, companies start looking for new commercial real estate space as little as nine months before their existing lease ends. Unfortunately, they're doing it wrong. To successfully find and negotiate a new space, the savviest tenants can spend two to three years planning for a move.

Step 1: Determining Your Space's Suitability

The first step in looking for new space is to step back and look at your existing space. Sometimes, there's nothing wrong with your existing commercial real estate that a few nips and tucks won't fix. If your existing space basically works and your rent is at market, staying is usually cheaper and easier on your business due to avoiding the interruptions caused by moving.


Step 2: Finding a Commercial Real Estate Broker

If you decide that it makes sense to look at a new space, the first step is to find someone to help you with the process. A professional tenant rep can save you time by helping with every step in the process while also delivering better results due to his high level of expertise and access to special tools.

Usually, your first step is to go back to the broker that brought you to your current space. However, the market is always in flux, and it's also a good idea to reach out to other brokers that are active in your area. Talk to similar companies to see who they have used in the past, as well.

Step 3: Researching Markets and Submarkets

The site selection process can be the most time-consuming step in finding a new piece of commercial real estate to occupy unless you are absolutely sure that you want to stay in the same general area. Barring that, you will want to study demographics and economics, conduct site visits, and really find the perfect place for your business. Even with a commercial real estate broker's help, this process can easily take six months, especially when you factor in travel.


Step 4: Discussing with Your Existing Landlord

Once you generally know what you want, it's time to sit down with your landlord. You will probably still have 18 or so months left on your lease at this point, but it's still a great time to have a discussion. One possibility is that your landlord might be willing to sweeten the pot to keep you. Another is that they might want to get you out sooner to accommodate another tenant. In a worst case scenario, you waste an hour but you still retain all of the rights you have under your lease.


Step 5: Touring Spaces

Once you know that you're moving, it's time to start seriously looking at spaces. Your commercial real estate broker can help facilitate this entire process by finding potential sites and by arranging your tour. This process can usually take a few months.


Step 6: Negotiating and Signing

Once you've found the perfect space and a couple of backups, it's time to start the negotiation process. The process' speed varies based on your market, but it's best to earmark a couple of months so that you aren't rushed into taking an unsuitable offer.


Step 7: Building the New Space Out

Finally, you have to wait for your space to be built out and for all of its systems to be installed. Even simple build outs can take 60 or more days.


Optional Step: When Bad Things Happen to Good Commercial Real Estate

To really be safe, wise tenants build a few extra months into their schedule. That way, if something goes wrong, they still have some extra time.

 

Other articles to check out:

Commercial Lease Extension Clause Tips

Creating Flexible Office Lease Structures

Checklist When Leasing Commercial Space

 

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Don Catalano

Don Catalano

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