If incorrectly negotiated, commercial real estate leasing conditions can result in hidden costs. This can negatively impact the business’s profit. To avoid such unwanted scenarios, it is important to approach the whole process of commercial leasing with strategic planning. This text will show you how to diligently plan your commercial real estate conditions and outcomes.
What Are Your Business Needs?
First, you need to evaluate your business goals and what your business requires. This involves considering the current situation regarding your space needs and future needs regarding your space budget and preferred location. You should think about the scalability of your business and how it is connected to the commercial space you will need. Good questions to ask during this stage are:
- What is the minimum and maximum space your business needs?
- How much rent can you pay for commercial real estate and other associated costs?
- Which location will be best for your business?
If you can’t plan for the future, consider shorter lease terms, like two or three years in advance. This way, you’ll be more comfortable planning for the future while still having the opportunity to be flexible in long-term goals.
Ask for Help from a Commercial Lawyer
Commercial lawyers are excellent professionals who can help you navigate the commercial real estate processes. They can help you understand the lease terms, identify potential bottlenecks, and negotiate favorable terms. They can help you review legal aspects like hidden costs and additional fees, termination conditions, and responsibilities for maintenance and repairs.
Do You Know Your Costs?
Next, you should review all the costs related to the commercial real estate lease and ensure they fit within your budget. The budget should include base rent and incidental expenses, including utilities, property tax, insurance, maintenance, and common area expenses. If there are any possibilities for future increases, ensure they are noted explicitly in the lease agreement.
Check Market Rents
You need to compare the market rents in the desired area to understand whether the landlord is giving you favorable terms. You can even consult with a commercial realtor because they can give you up-to-date information about market rates and will help you negotiate a better deal.
Inspect the Property
Next on the list is researching the property, including organizing a thorough inspection so you can make informed decisions that will fuel your negotiations. Also, look at the traffic, parking availability, and neighborhood dynamics, along with the types of tenants using the commercial spaces in the desired location. Research the landlord’s reputation so you know who you’ll be dealing with.
Seek Tenant Incentives
Landlords often offer incentives to attract tenants, mainly when the space has been vacant for some time. These incentives include rent-free periods, contributions to renovation costs, or other financial boosts.
Review Termination Conditions
Another critical aspect in negotiating a commercial real estate lease is reviewing the termination conditions and understanding the roles and responsibilities of either party involved. This refers to penalties for breaking the lease, subleasing options, and what will happen if the building is sold. Having clear termination conditions will protect both parties from unexpected disruptions.
Negotiate Leasehold Improvements
Think again about your business needs and whether renovations will be required. Ensure that the lease allows you to make the improvements and that the zoning laws will support your plans. Talk about it with the landlord to cover these improvement costs, some or all of them, or to reimburse you if they terminate the lease earlier than the deadline.
Take Your Time Signing The Lease
Take time to sign the agreement even if you have seen all the documentation. Give yourself time to reflect on the clauses and consult a lawyer to ensure you are protected. You can be tempted to sign it quickly, especially if you find the commercial space you like, but it is strongly recommended that you only do so with understanding the terms first. Know that conditions are typically negotiable, so take your time to meet all your needs.
The Role of Property Managers
Property managers can offer invaluable insights into commercial leasing. Since they handle day-to-day operations, maintenance, and tenant relations, they will know what tips to give you and how to lead the negotiation process. They can oversee lease compliance and the enforcement of the lease legislative terms. They will make sure you meet your obligations and thus avoid potential conflicts.
Conclusion
Negotiating for better terms in a commercial real estate lease process involves careful planning, deep research, and strategy. You can seek professional help from a commercial lawyer or property manager to help you understand your costs and get better negotiation deals to meet your business goals. Taking your time, not rushing, and ensuring the agreement covers and protects all your business needs is essential.
