One of the biggest mistakes new small business owners make is equating leasing commercial space with renting an apartment. Apartment leases have a few variables that a non-professional can easily handle. Commercial leases are multifaceted tomes with bear traps in every clause that need the expertise of a lawyer or a commercial agent to dissect..
For example, apartments have short lease terms, averaging 12 months. Commercial leases have long lease terms, usually between five and 20 years. Other key considerations include the following:
- Move-in dates.
- Renewal clauses.
- Remodeling costs.
- Repair costs.
- Noncompete clauses.
- Tenant improvement funds.
- Common area maintenance fees.
- Zoning restrictions.
- Landlord’s right to relocate tenants.
Landlords typically try to give tenants a boilerplate lease that benefits the landlord and pretend it’s non-negotiable. Don’t believe it. Every point is negotiable, but without an experienced commercial agent negotiating on your behalf, the landlord will get the better end of the deal. The agent’s job is to maximize profits, and they handle these types of negotiations all the time.
Whether you’re leasing short-term or long-term, hiring commercial real estate agents can help you assess your needs, develop a budget and negotiate with the owner about your lease. Here’s what you need to know.
Benefits Of Hiring Agents When Leasing An Office Space
Good commercial real estate agents for tenants know every commercial space available in the area they work in. This includes spaces that don’t appear in listings. There are many unlisted opportunities, and one of them might provide your business with the most traffic.
A commercial agent understands what their clients need. For example, they know that office space needs 100 to 150 square feet per customer and that retail space needs 15 square feet per customer. It’s their job to help you determine what you need and then take you to the properties that fit.
Other needs CRE agents help their clients determine include:
- Lease term.
- Lease cost.
- Move-in date.
Commercial Agents Can Help You To Set A Budget For Your Lease Plan
Determining a CRE budget requires analysis. Unlike apartment leases, CRE leases have numerous expenses beyond the base rent. Without carefully determining the total cost of different space options and comparing how each affects the bottom line can doom a business that didn’t seek out the help of a commercial agent.
To determine the budget, first find the average cost per square foot for the type of property you want in the area you want. Multiply that number by the square feet you need, then divide by 12. This gives you the budget for the base rent.
Factor in utilities (2 percent) and CAM (15 percent to 35 percent annual rent). Then, you’ll need to estimate the cost of build-outs, which are renovations to prepare the space for your business. These costs must be analyzed against revenues to determine profitability.
A commercial agent knows how to get these numbers right. Getting into the right type of property and location without straining cash flow requires these estimates be accurate. Commercial leases contain mind-numbing legalese that goes on for thousands of words.
Your commercial agent will analyze this document and negotiate changes in your favor. Read below for important questions to ask a commercial real estate agent for tenants.
Things To Ask Your Commercial Agent
Will the space be ready by the time you move in? Be careful about lease clauses that allow landlords to locate tenants elsewhere if the space isn’t available.
- Renew options – The landlord has no obligation to rent out the space to your business again unless the lease contains a renewal clause. A forced move could devastate a business.
- Traffic around the area – Commercial real estate agents have this data.
- Non-compete clauses – Imagine a competitor moving in next door. A non-compete clause keeps your competitors at a safe distance.
- Repairs/renovations – The lease stipulates what you must fix. A Commercial real estate agent negotiates to limit your responsibility. Renovations can be costly: Ask a commercial agent about tenant improvement funds.
- Insurance – Who is responsible? If the landlord holds the insurance policy, is it sufficient?
Finding the right space is crucial. The wrong space spells trouble for businesses. Also, the right price can be equally important. A great space that forces a business into the red is no great space after all.
A commercial real estate agent finds the right space and negotiates the price and terms that allow business success. LCI Realty can connect you with a commercial agent from our team that will help you lease the best space for your business. Contact our office today to get started.
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