Commercial leases are one of the most important decisions that you'll have to make for your company. After all, the outcome of the leasing process determines where your employees will conduct daily business and how much financial burden is added to your balance sheet. Following these tips will help to ensure that you make the best possible decisions regarding your new lease.
1. Plan Ahead to Avoid Time-Crunch Mistakes
Most people fail to appreciate just how long it can take to find the perfect space to lease and negotiate a fair deal. As the clock ticks down to the end of an existing lease or a move-in deadline, you're more and more likely to have to settle for an office or a lease agreement that is less than ideal. If possible, begin at least a year before you need to occupy your new office space. Otherwise, start as early as you can. Also, be sure to have a backup location lined up in case your first deal falls through.
2. Carefully Weigh Long-Term Lease Options
Long-term leases can be advantageous to companies under the right circumstances. Opting for a long-term lease can often equate to big savings and make landlords more willing to make concessions. This is particularly true during periods of weak economic growth when vacancies are likely to be high. If you do decide that a long-term lease would fit your business needs, take steps to have some flexibility like early termination and sublet and assignment clauses written into the agreement to protect your company.
3. Don't Skimp on Due Diligence
Research is an essential step in the commercial lease process that you can't afford to skip or rush. You'll want to know the current market rents in your area and have a feel for the overall condition of the real estate market. In addition, make sure that you thoroughly research the building itself. Are there competitors located in or near the building? How much traffic flows through the parking lots and lobby during peak hours? Is the neighborhood safe and friendly? Will your employees be able to easily commute to the building and find stores, restaurants and services nearby? What is the landlord’s reputation like? Have there been any news reports about the landlord or the building?
4. Never Agree to the Landlord's First Offer
The first draft of a commercial lease is heavily in the landlord's favor. Consider it a working document and plan to negotiate for better terms.
5. Enlist the Help of One Tenant Representative
A tenant representative broker can simplify every step of the leasing process and provide you with advice and guidance along the way. Tenant reps even function as advocates during lease negotiations to help ensure you are treated fairly. The valuable services of a tenant rep broker don't cost your company a thing, as the landlord covers their fees. Keep in mind that while one tenant rep broker is a must, hiring two is ill advised; you want your rep to feel assured that if they help you close the deal they will get paid.
Here are a few other articles to check out:
Subscribe to our blog for more CRE tips!
