What are the best practices for Commercial Real Estate leasing?
As a business, one of your major expenses will be your rent. Many businesses do a bad job of negotiating their commercial real estate lease and find up saddled with huge hidden costs. This could negatively impact your company’s profitability if you are not careful. The following due diligence will help you reduce unnecessary costs when looking for a space to rent.
1. Hire a lawyer
Involving a commercial attorney in your lease discussions is essential. It is preferable to hire a competent business attorney who is familiar with leases. Some companies choose a general or family attorney, which results in their signing a lease with unforeseen charges.
2. Evaluate your business needs
Before entering into a lease negotiation, do some research. List the space requirements for your business now and in the future, then decide on a budget and preferable location.
3. Understand your costs
Make sure the overall amount of the incidentals you are expected to pay for falls inside your budget by carefully reviewing them. Additionally, it should be specified in detail if base rent or incidentals will increase in the future. Don’t be afraid to request revisions.
4. Understand your lease options
The costs covered in the lease can vary greatly, based on the type of lease. Different types of leases include gross rent lease, net lease, double net lease, and percentage rent lease. Do some research on the type of lease you’re dealing with.
5. Check market rents
Get a sense of market rents in the area where you are looking, then compare them with the asking rent. To learn about current market leasing rates, speak with a commercial realtor. If the asking rent is too expensive, using this information may help you negotiate a lower rate.
6. Research the property
Gather information about the property that might come in handy for your lease negotiations. Look into what kind of traffic the area has and neighboring businesses.