Ins and Outs of Commercial Leasing

January 21, 2019

Leasing commercial space can be time-consuming, frustrating and exciting all at the same time, no matter if you are the tenant or the landlord. Learning more about the ins and outs of commercial leasing can better prepare you for the road ahead.

If you’re a pro at leasing business space, then you know certain terms of the lease can make or break your business. Having someone on your side, a commercial real estate broker who specializes in representing landlords or tenants, can be crucial to your success. They will help you not only negotiate terms but will help you find the appropriately sized and located space for your needs.

Understanding the terminology and concepts in commercial leasing will help you to get acclimated more quickly and knowing what the goals are for the other side will help you when looking for certain terms for your own.

Landlord Reps – Before Leasing Your Property

Do Research: There is a lot to this and it will take time. Finding the vacancy rate for the area your building is in, and even more specifically, for buildings like yours. These rates vary by the type of building, such as an office building or a warehouse.

Check Zoning Laws: Zoning laws change and you need to make sure you have the latest ones. These laws can restrict what type of businesses are allowed to lease and failure to comply can be expensive, from paying fines to losing a tenant. For instance, tattoo parlors may be restricted into specific zoning areas, depending on the city, and might not be welcome in a downtown district.

Know Who Your Tenants are: For instance, those with businesses that won’t be allowed due to zoning can be crossed off, as can those whose financials show their long-term ability to pay is in question. Cultivate those with a strong cash flow and whose needs mesh well with those things you can accept, such as outside signage and foot traffic.

Asset and Property Management: Do you want to keep tabs on when to upgrade parking lots and make sure your buildings perform well on energy audits? Do you want to oversee regular maintenance of loading docks, ADA compliance and a myriad of other building items? If not, an asset manager is your next best friend. If you don’t want to deal with building inspections and monthly rent payments, a property management company will be another must have.

Tenant Reps – Before Leasing or Renewing a Lease

Start Now: Well, maybe not right now, but definitely well ahead of when you want to be moved in. 12 to 15 months gives plenty of time to negotiate a lease renewal, especially if you don’t want to move, but have to create competition to play one landlord against another in order to get what you need. A tenant broker shines when it comes to this type of work.

Winning is the Game: Both you and the landlord are in this to win. Negotiating aggressively is vital as you want to get as many landlord inducements as possible—free rent, tenant allowance, waived deposit, low rates, etc. Always ask for more than you want, enough to go a few rounds of negotiation. That might be asking for 10 months of free rent when you really want seven, or $25,000 more on the tenant allowance than you really want.

Talk to Others: Don’t be afraid to ask other tenants questions. Introduce yourself and explain why you are asking about the landlord, the property management, how much they pay for rent, and how the negotiations went for them.

Be Quiet: Landlords don’t mind taking a piece of your proverbial pie, if you share it. To make sure they don’t try to do that in the form of higher rent, be quiet about your successes. Landlords know how disruptive a move can be and feel they have you stuck in a place where you have to accept an increase at renewal time. If they don’t know, the point goes to you.

Don’t Take the First Offer: Negotiation means you go back and forth, and it is expected. No landlord expects you to take the first offer and if you do, it is certain you have left money on the table that could be in your pocket instead. Also, remember to ask for the same inducements that would be offered a new tenant, except you have a proven track record, and better influence.

Find a Commercial Real Estate Broker

Having a commercial real estate broker at your side is your ace in the hole. He or she will have your best interests at heart, have a thorough understanding of the market you are looking in, have intimate knowledge of how landlords think, and know exactly how to get what you need during negotiations. It may take nerves of steel and you will have to place your trust in them, but you will come away from the negotiation table satisfied with the lease.

At Caton Commercial Real Estate, we have brokers on both sides of the aisle, so to speak. No matter which side you find yourself on, we have an experienced broker to help you. Give us a call today and see what we have to offer.

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