What do I need to know about leasing commercial space?

No matter how advanced information sharing becomes, there will always be a demand for commercial real estate. Once a business owner has identified their goals and laid out a strategic plan, the question often becomes, “where am I going to put all of this?”. There are a number of questions that you can ask yourself which will help you identify the perfect commercial space for your business.

1. What are your parameters?

What would a brick and mortar commercial space help your business achieve? Is the goal to increase foot traffic for prospective customers? Or, is it to provide employees with an interactive workspace that amplifies creativity and communication? Once this is identified, you can begin to cross out spaces that don’t accommodate your accessibility demands. Foot traffic, vehicle traffic, visibility, distance from amenities and parking are all key factors that come into finding your business its prime location.  

Another very important parameter that needs to be considered is zoning. All cities, towns and municipalities have their towns broken into zones - industrial, residential, retail and business zones all have different codes that allow or prohibit certain activities. This is how towns prevent asphalt processing plants from being built next to a plan of homes.

An additional parameter that you will look at is size, budget and your ability to scale or grow. A core component of your business plan will be what you have budgeted out for operating costs. A business needs to operate within its means - however, business owners need to keep their five-year plan in mind while choosing a commercial space. If your plan is to double that amount of clients you service by year two, do you want to set up shop and sign a lease in a space that doesn’t allow for reasonable expansion?

2. What types of commercial leases exist?

You have a number of options when it comes to finding a lease.

A Full-service Lease: this means your rent is all-inclusive. The owner pays for property taxes, insurance, maintenance and cleaning. This is most common for commercial office space.

A Net Lease: this lease will be lower in cost than a Full-service, but certain expenses or passed off to the tenant on a monthly basis. This can include common area maintenance items (CAMs), taxes and insurance.

A Modified Gross Lease: Much like with a net lease, the tenant will be responsible for paying CAMs, taxes and insurance, however, they are included as a fixed lump sum, avoiding any surprise costs.

Once you’ve done your homework and toured a few spaces, it will be time to write a business letter of intent (LOI) and begin negotiating lease terms. One of the most important things I can stress to small business owners that are navigating the process of finding commercial space is to get it in writing. Before you view any properties, have a list of questions prepared, then follow up and get the answers via email. Even more importantly, you’re allowed to negotiate. Commercial property landlords are almost always expecting you to, so chances are you’ll get a counter-offer.

There are countless variables that go into finding exactly the right space for your business. Small business owners can meet with local business consultants like us at PRIOR Business Consulting who specialize in streamlining this process and have experience in finding local small businesses exactly what they require to grow! Please reach out today to learn how we can help you grow your business.