10 Tips for Renting Commercial Property
When you rent commercial property for the first time, it’s good to know a few tips that can guide you through the lease negotiation process. Unlike renting an apartment or house, more negotiation and haggling often goes into renting a commercial building. To understand the process, it helps to work with a commercial real estate broker who has years of experience to get you the best deal.
If you’re doing some research before you head into the negotiating room, here are ten need-to-know tips to rent commercial property.
1. Know Your Must-Haves
Every buyer has a list of things they would like, things they need, and things they absolutely don’t want. It’s important to have an extensive list of your priorities before negotiating. If you need more parking, then now’s the time to ask, not after you’ve signed the lease. Having a clear picture of your must-have items will help you negotiate a great deal. Without a clear understanding of your needs, you could find yourself swayed during negotiations and leave without key items in the contract.
2. Decide on Your Lease Length
How long will you be in this space? There are some perks to negotiating a longer lease. You can often get cheaper rent and you’ll be able to plan out the future of your business based on a solid location. However, there are some downsides as well. What happens if your business fails? Or your team grows, and you need a bigger space?
Take a close look at your business’s performance and how fast your team is growing before you sign a long lease. Remember, when you rent commercial property, your lease can range anywhere from three to five years.
3. Triple-Check the Contract
If you aren’t working with a professional real estate broker, you could be trapped into unfavorable terms, purely because you didn’t understand the language in the contract. If you’ve looked over the contract once, you need to look over it again. And again. Research anything you don’t understand and discuss the contract with your broker if there’s anything you don’t understand.
4. Negotiate the Perks
It’s difficult to negotiate key items like the base rent, lease term, or utilities. You may find it easier to negotiate on details like cleaning, who’s responsible for building maintenance, or Wi-Fi. If you’re able to negotiate free employee parking or more spaces for clients, you’ll save money in the long run. Don’t forget how expensive it can be if a window breaks or the HVAC system fails. Negotiating perks like these beforehand can save a lot of money long term.
5. Understand Fair Market Rates
Understanding the CRE market in your area is crucial to rent commercial property. Could you tell if the rent your landlord is asking is way higher than what’s fair for the area? Understanding how the market in your area is trending takes time and expertise. It’s more than just researching what similar buildings are going for—it’s knowing when to take the leap and when to wait. You’ll be kicking yourself if you sign a contract only to have rent prices drop a few months later.
6. Become an Expert on Types of Commercial Leases
There’s more than just one type of commercial lease. Understanding the different types will help you get a satisfactory contract. For example, a single net lease means that the tenant only pays for the utilities and property tax. The landlord pays for maintenance, repairs, and insurance. In a double net lease, the tenant is responsible for utilities, property taxes, and insurance premiums, while the landlord pays for maintenance and repairs.
There are many different types of leasing contracts to rent commercial property. Understanding the difference between them means paying just utilities and property tax or paying for structural repairs.
7. Check the Cure Period
The cure period is the grace period you are given for breaching a contract. If the original contract states that your cure period is only a day, you could be subject to legal action for being only a day late on rent. Cure periods save you from facing large fines for small mistakes such as a bounced check or forgotten date. Don’t sign any contract to rent commercial property until a cure period is written into it.
8. Protect Yourself from Competitors
Let’s say you run a clothing store. You’re looking for space to rent. After you’ve found the perfect space, moved in, and set up shop, you’re horrified to hear that another retailer selling clothes to the same target demographic is moving in next door. Now, you’re losing customers to the new store.
It’s important to include a clause stating that the landlord won’t rent out space to one of your competitors. You don’t want to find yourself unable to pay your rent because a copycat of your business moved in next door.
9. Be Able to Walk Away
The first building you see, even the first building you start negotiations on, may not be the right building for your business. Instead of committing to one building immediately, be sure that if negotiations don’t work out, you can walk away. Being able to walk away gives you power over the situation and allows you to handle negotiations with a cool head.
10. Work with a Real Estate Broker
If this list has shown you anything, it should be that working with a professional real estate broker makes the process of renting commercial property that much easier. When you work with a real estate broker, you’re working with a professional who has the experience to guide you through the process. They’ll be able to help you get the best deal and are familiar with the negotiation process.
With the right partner, finding a commercial property to lease will be less stressful and time-consuming. And, most importantly, you can have full confidence that you’re getting the best deal possible so that your business can thrive in your new space.
If you’re ready to rent the commercial property of your dreams, get in touch with AushCo today.