Mar 5, 2018 8:33:00 AM

Costly Mistakes to Avoid When Leasing Commercial Space

By Don Catalano

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Costly Mistakes to Avoid When Leasing Commercial Space.jpg
For any tenant, signing a commercial lease is a major decision that necessitates careful consideration, thorough research, and ideally, advice from experienced commercial real estate experts. Before you sign a commercial lease, it’s important that you fully understand what it implies and ensure that it’s in your business’s best interests. The following are tips on how to avoid costly mistakes with commercial leasing:

 

1. Hone Your Negotiation Skills

Theoretically, all terms of a commercial lease are negotiable. Even so, your negotiation power depends on your conversancy with the local rental market. Is there plenty of commercial space available? What are the local rent rates? With that kind of information, you will be able to face your landlord and negotiate a fair deal. Download our free eBook: Winning Your Lease Negotiations in 10 Easy Steps.

 

2. Scrutinize All Terms of the Lease

Leases are generally created by landlords or their attorneys. Unsurprisingly, the terms therein usually are written to work in the landlord’s favor. Without thorough scrutiny, you may end up agreeing to terms that will cost your business big time. Therefore, your next responsibility as a potential commercial tenant is to check out the terms and ensure that they work in your favor:

  • Length of your Lease: It’s smart to bargain for an initial short-term lease with one or a few renewal options. This will give you more flexibility if the needs of your business changes over time.

  • Base Rent and Increases: Check the amount your landlord is asking for rent and ensure that it’s within the local rental rates. Confirm whether the amount quoted includes other expenses such as taxes, insurance, repairs utilities. Also seek to know at what rate the rent will be increased and after how long.

  • Repair and Maintenance: It’s also good for you to know beforehand whether you as the tenant will be required to shoulder expenses accrued from the repair and maintenance of the property.

  • Subleases and Assignments: Be sure to know whether the landlord will allow you to sublease or assign the office space that you aren’t currently using.


3. Hire a Tenant Rep Broker

The following are the reasons why you need a tenant rep broker in your corner:

  • They are familiar with the terminology used in real estate, thus can help you understand all complex concepts and lease terms.

  • Familiar with the market in your area and will ensure that you will not have to pay more than you have to.

  • They will do all the research and negotiation for you, letting you focus on other aspects of your business.

  • The landlord covers the cost of brokers' services. Since there is absolutely no cost to you to reap all of the benefits above, the question really isn't why should you have a tenant rep broker, but why wouldn't you?

Whether you're a small startup looking for new office space, or a medium-to-large-sized company looking to increase its office space, follow these tips in order to avoid costly mistakes that could negatively affect your business.

 

Some other articles to check out:

Commercial Real Estate Leasing Tips

Open Office Space: Is It Right For You?

What to Avoid in Commercial Real Estate

 

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Topics: commercial leasing

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Don Catalano

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