How to Identify Your Space
Identifying Your New Space (Part 2/3)
Once you have identified some potential spaces/properties that may work for your business the next move is to decipher the properties to determine which will work best for your business. Whether you are working with a commercial real estate agent, or not, you need to have a full understanding of market rates for comparable spaces and how the different areas of town vary in price. This can be a lot of work if you are going at this solo because finding market lease rates and comps are not gathered into a single area for you. Once again, I would advise calling a commercial agent before you schedule showings with the listing realtors, so that you have someone advocating for your best interests, it costs you nothing.
After you have visited the various locations, you will most assuredly find one or two that will work for your business but now it becomes a numbers game for both sides. This is where it would really, really help to have a commercial agent on your side, but if you don’t it’s not the end of the world. You have a monthly budget in mind that you are comfortable with, so now negotiations can ensue but here are a couple things you need to be acutely aware of:
What type of lease is being offered?
NNN, Modified Gross, Full Service? All of these lease types have different financial ramifications to your monthly budget. It is estimated that NNN leases cost an additional 25% above stated monthly rate. So, pay attention.
What sort of changes to the space do you need (tenant improvements)?
Who is responsible for paying to upgrade a space that you do not own? Will the owners give you a tenant allowance for changes to their space? Will they make the changes themselves?
How long is lease term?
Keep in mind once you sign a lease you are responsible for the financial obligations in the contract. Keep an eye on yearly increases, typical increases in our market are 2.5% per year.
Who is responsible for what?
Are you responsible for sewer, garbage, water? Who is responsible for landscaping, snow removal and de-icing? Maintenance? These are all things you need to be aware of before signing a lease
I have heard it said many times in real estate “everything is negotiable”. It’s the truest shit ever spoken. Landlords need tenants, the stronger the tenant profile the more negotiating power you have. Everything written above is the reason you should get a tenant representation agent on your side but if you are comfortable going at it alone, just keep in mind listing agents (building representatives) have a legal responsibility to the building owner to protect their best interests, not yours.