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Whether you have a small or large company, renting office space can become an expensive exercise. Your due diligence is the key to having a smooth occupancy. If you slip up on your due diligence, you could end up with loads of headaches and paying much more than you should.
You need to understand what you are taking on and what your rights are. The lease market is a tough one and rightly so. Many landlords have had to deal with bad tenants and consequently, they also just want to protect themselves. Here are seven due diligence tips that you can follow for your next lease.
Set Up The Right Team
Let’s face it; not everyone is a real estate expert and being aware of your lack of knowledge will put you into a position to gather a team that will do the job right.
In most due diligence teams, you will typically have lawyers, appraisers, inspectors and engineers who will evaluate prospective properties. Once potential properties have been identified, then your tenant rep can start to work.
If you want the best possible deal on some office space, you need a competent tenant rep. They will be able to negotiate on your behalf. They know what market-related prices of an area is and can determine if you will be overpaying for a property. They will also be able to determine which space will suit you and your budget the best.
Get Involved in the Process
Although you might have a team that works with you to find the right space, you are the only one who can really say if a space is good enough. The reason for this is because you are the only one who has the future vision of your company laid out.
You have a keen idea of what space you’ll need and will need to measure out that space yourself. Miscalculating and not communicating what you measured could end up costing you unnecessarily. Besides, it’s always a good idea to learn something new and improve your own skills.
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Read, Read, and Read
When you are on the verge of signing a new lease, you will need to go through the lease agreement. This is not light reading material and many details can be hidden in the fine print. This is not a document that you can just skim over.
More than that, tenants will often want to reduce their liability and will work that into the agreement. If you don’t have the legal know-how and don’t know what to look out for, then you need to enlist the help of someone with the appropriate skills. You could save yourself heaps of trouble by dissecting the agreement.
Calculate the Costs
Sometimes, the amount on the lease agreement looks too good to be true, or you might feel that you have the capacity to pay the lease. In some cases, you could be spot on, but most of the time, there are hidden costs that you don’t take into account.
Part of your due diligence is to determine what your total cost of ownership or lease account will be. You need to determine what costs of compliance of area-specific regulations are as well as determine the business licenses and taxes and any other fees you need to pay to get the true cost of your lease.
Other Documents to Consider
The lease agreement is one thing, but there are other documents that you also need to inspect before you can make a final decision. Every building has some kind of insurance and you need to be sure that the building insurance and yours can work together.
Furthermore, the building’s CAM and maintenance histories also need to be looked over to see if the maintenance has been diligently carried out. You could end up footing the bill for repairs that were supposed to be done in the first place.
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Get to Know the Market
This little point has two aspects to consider and these can actually be done before you even start to look at individual spaces. Firstly, consider the nature of your business and then determine whether the area you are looking at will suit your business now, and in the future.
Secondly, if you understand the leasing market, you will be in a position to barter and make reasonable offers of a property. You can then gauge whether the landlord’s responses are in line with market norms.
Getting the Right Fit
Measuring out your space is a no brainer. You have to make sure that the space that is specified on the lease is the same as the configuration of the floor space that you intend to rent. This is not the only consideration, though.
You also need to calculate the space’s wiring, access points, the HVAC system and other elements that your company needs.
Finally, your due diligence needs to be directed at the other tenants in the building. If you have a printing company, it will make sense to rent a space that is shared with a textile manufacturer.
Deciding on a new space to rent is not as easy as liking a space alone. There are many factors that need to be taken into account and your due diligence will help you in sniffing out the pitfalls or loopholes. Taking time and not grabbing the first property that looks the part will save you thousands of dollars in the end. After all, when you look for a space to lease, you are looking to root your company. You can never investigate too much or do your due diligence too thoroughly.
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