Commercial Property Leasing

A Basic Guide To Commercial Property Leasing

Commercial Property Leasing

Commercial property leasing allows you to operate your business from a location that you do not own. Many business owners approach commercial property leasing in the same manner as residential property leasing. This is not actually the best approach because the steps for choosing and leasing a commercial property are different to a residential one. This is why you need to know what the steps are to leasing commercial property and what you should be doing.

Set Your Commercial Property Parameters

The first step in commercial property leasing is determining the parameters of the property search. There are many different types of commercial properties on the market and you need to ensure that you are renting one that works for your business. There are 5 points that you need to consider when determining your parameters and they are your ideal customer, the property type, the size of the property, your maximum budget and how accessible the property is.

  • When considering your ideal customer, you have to consider if the customer will be visiting your location or not. If they are, you need to ensure that you are located in an area that they frequent. If the customer is not coming to your location, you can look at property further away.
  • When looking at the property type, you have to consider property zoning. Building and areas are zoned for a specific use and you need to ensure that the property is zoned correctly for your business. There is no point in leasing a property for your restaurant that is not zoned for this.
  • To determine the size of the space you need, you have to consider how you are using the space. If you are going to have customers in the property, you have to determine how many and what they are going to be doing. If you are looking at commercial office space, you have to consider the number of employees you have and the amount of space their equipment requires.
  • Your maximum budget should be determined before you look at any property. This budget should be the maximum monthly budget you have for the rental and will help you limit your search to properties that you can afford. The budget that you set should be determined by your business income as well as the size of the space that you need.
  • Accessibility is something that retail businesses seriously have to consider. If you are not accessible, your customer will not come and you will lose business. You should also consider how accessible the property is for your employees in terms of parking.

Find A Commercial Real Estate Broker

Once you have your parameters set, you will need to find a commercial real estate broker. There are 2 types of brokers and you need to look for a tenant broker.

  • A leasing agent will work with landlords and will not have your best interests in mind when showing your properties. This is due to the fact that listing agents will earn a commission which is paid by the landlord.
  • It is important to note that you do not have to use a tenant broker. However, these brokers will have access is a list of available real estate that matches your needs. They will also understand marketing pricing and competition for the properties. The tenant broker will also be able to negotiate your lease for you which is something that can be difficult for people leasing commercial property for the first time.

When you look at working with a tenant broker, you may be asked to sign an exclusive arrangement. If you agree to this, you will have to work with one broker exclusively for a timeframe of 3 to 12 months. A commission between you and the broker will be negotiated, but this will generally be waived if a tenant broker fee is paid by the landlord.

Know The Different Types Of Leases

There are 3 types of commercial leases aware of.

  • The first is the full-service lease which is the most common for office buildings. This type of lease offers all-inclusive rent which means the landlord will be responsible for all of the expenses associated with the property such as insurance and property tax. Maintenance and utilities will also be taken care of by the landlord.
  • The second lease type is the net lease where the landlord will charge a lower rent, but can also include monthly usual costs. These costs will cover things such as the property taxes, common area maintenance and property insurance. When taking this type of lease, you will have a lower monthly rental but you will also be liable for additional property costs.
  • The last type of lease is the modified gross lease which is a compromise between the full service and net lease. When using a modified gross lease, the tenant will pay a portion of the property taxes, insurance and common area maintenance. This will generally be paid as a lump sum with their rent.

Before you lease any commercial real estate property, check out the types of commercial real estate to invest better.

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