Often small-business owners must expand their business. When profit becomes sustainable, sufficient, and predictable finding a location that allows for growth is essential. On the other hand, some businesses obtain capital infusions that are predicated on growing the business. In either case, the next step is finding and appropriate location, space, and lease terms.
What is a Commercial Lease?
It is an agreement or contract between parties that allows one party to pay for the right to use commercially zoned real property under specific terms and conditions. The landlord is one party, called the lessor. The tenant is the other party, called the lessee.
Negotiating
Terms and conditions in commercial leases are negotiable. You are not obligated to agree to each provision as it is drafted. If the landlord provides the draft, there may be provisions you would like incorporated that are missing. This is one of the easiest things to overlook when negotiating a contract or lease. The party you are negotiating against is not going to include provisions that are to your benefit and their detriment!
Know the Area
Most people are not overly familiar with commercial space availability, locations, zoning, lease rates, and improvement costs. When leasing you should shop around, talk with landlords, find a commercial real estate broker, and become informed.
Commercial Real Estate Brokers
A broker can assist you with research, information, and expertise. They can be invaluable once they understand your needs. Brokers know the commercial space marketplace. Typically, a broker does not cost the lessor anything. The lessee pays the broker. There are two sides to this coin! "Your" broker is paid by the lessor and is only paid when you sign a lease. The second point is that some landlords offer hidden discounts to tenants that do not use a broker. If you do not have a broker and want a discount you are going to have to negotiate for it, they will not offer it.
The Lease
Read the details; discuss what they mean with a broker, the landlord, and other experts. Your business will be constrained by the terms and conditions in the final executed commercial lease. This document matters read and understand each provision.
We sign so many documents that do not matter that we tend be thoughtless when affixing our signature. The landlord has chosen every word in the draft lease they provide; they take this document seriously and expect you to, as well.
Space
Be cautious when estimating your need for space. Typical businesses need about 200 square feet per employee. Leasing too much space places an unnecessary burden on a business' profitability and growth potential. If you are unsure of the rate of growth, negotiate a shorter period or include options for expansion.
Your Lease Team
Leasing commercial space is not something most do on a regular basis ensure you have people to rely that can provide expertise. Your team might include a commercial real estate broker, an attorney, and a CPA.
Shawn is a real estate expert who works at a company that manages properties with office space for lease in Houston. Read more at http://hi-reit.com
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