Renting office space is one of the biggest business decisions a company may have to make. For many companies, it is likely going to be the largest expense. Hence, it is essential to watch out for common corporate real estate mistakes to avoid.
Below you’ll find the most common corporate real estate mistakes to avoid:
1. Leasing Too Much or Too Little Space
Many tenants do not have an objective and accurate estimate of their space needs, so they end up leasing either too much or too little space. Either option puts the corporate tenant in a difficult position. For instance, leasing too much pace can put the tenant in an economically unstable situation, as the company’s funds will be used to service unused space.
2. Focusing Only on Price
Price is not always the best predictor of value. Tenants who use price to be the major selection factor when choosing office space may be making a wrong decision. Instead of focusing only on price, tenants can seek clarity on what they will be getting in terms of amenities and square footage per dollar. Corporate real estate properties that are lowly priced may need a lot of repair and renovation. Hence, when estimating the cost, it is also important to consider what the costs will be to modify the space.
3. Ignoring the Fine Print
In commercial real estate, the fine print is very important. It is often said that the devil is in the details. In spite of this, many tenants ignore the fine prints or hastily go over it when they are about to sign the lease. This can lead to legal troubles down the line. Hence, tenant brokers are encouraged to seek clarification about any parts of the lease that are confusing or unfamiliar. Make sure that you seek clarification about parts of the lease that you don't understand. A tenant rep broker can be very valuable in examining and interpreting the lease document.
4. Renting an Unseen Unit
Many commercial real estate properties are now listed online. The ease of access to an online listing can lead to laziness and the renting of wrong properties. It will be a mistake to lease a building because of internet pictures and ad copy that are cleverly designed to attract new corporate clients. Without checking the property in person, you cannot accurately decide if it is right for your business. You should watch out for property owners who seek an agreement before you can access the property.
In addition, it is important to check if there are any parts of the building that require repair. Take pictures of chips in the wall, carpet stains, window cracks, or anything that doesn’t work properly. This will help you make a well-informed decision when choosing the property. Also, it will help you avoid getting accidentally charged for things that were already there.
5. Only Looking at the Property
When inspecting a commercial real estate property, it is common to think about the layout and amenities of the space first. However, there are other factors that may be essential to your business needs, especially the surrounding area. Hence, you may want to ask the following questions when deciding on the commercial property:
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What other businesses are nearby?
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How popular is the area?
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What's the average cost of rent?
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Are their plans for future development or changes to the neighborhood?
Only looking at the property is a mistake to avoid; your office location matters as much as that space's individual features.
6. Looking at Sites in Isolation
Similar to the last mistake, only looking at sites in a location may be another mistake to avoid. You should check all the possible locations that your business could be situated. For example, you might think that your Los Angeles sales office has little to teach you about your Las Cruces, NM outpost. However, an office worker needs about the same amount of space everywhere -- desks and phones don't get bigger just because they're located in a small city instead of a metropolis.
Comparing locations help you to look at factors like warehouse efficiency, sales per dollar of rent and square footage per employee that let you make portfolio-wide efficiency calculations and separate between your good sites and the ones that need to be taken out of your corporate real estate portfolio.
7. Missing Key Dates
Corporate real estate leases have strict timelines attached to certain tenant rights. For instance, if you don't pay your rent on time, you could be evicted subjected to notices of default. This can hurt your business operations as well as business financial plans. Also, renovations are often scheduled. If you do not inform your attorney when you notice a discrepancy in what you are paying for CAM fees as well as other building expenses, you may have to accept what your landlord days. Timing is very important when it comes to corporate real estate.
8. Failing to Discuss Lease Terms
Unlike residential leases, commercial leases are long and complicated. It is important to understand every detail in the lease agreement. If you don't understand the language, you can seek clarifications. Also, talk to your tenant rep to help you check the lease document for any unfavorable clauses.
9. Waiting Too Long to Search
It is a mistake to wait until you need office space before you begin the search. This is because it takes almost twice as much time to find an ideal office building that fits your business needs. Many companies underestimate the amount of time that it will take to find the right commercial office space for their needs. You can plan many months, or even years, ahead, so you can learn more about the property owner, the inner workings of the market, as well as have a good negotiation with the property owner.
10. Not Working with a Tenant Rep Broker
The commercial real estate market is very dynamic. Hence, it is important to work with a professional who is experienced and up-to-date with market trends. A tenant rep broker can provide insider advice for each specific deal. In addition to the market knowledge that a tenant rep broker provides, they have a vast network that can help you meet your office leasing needs.
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