Are you ready to lease a commercial space?

2009-05-01T16:00:00.000-07:00

You’ve done your research into the competition. You’ve checked out the demographics of the area where you would like to locate your business. Your business plan is ready. You have your banker’s backing. You’re ready to grab a space and sign that lease, right? Wrong!

I would recommend that you engage a competent commercial agent to assist you in your search to find the right space. As I mentioned in a previous blog, there are many factors that go into finding the right space for your business. The area’s market conditions should be a very important factor in making your decision. Who else is going to know those conditions but your local commercial agent?

You may run into lease terms that are totally unfamiliar to you. Do you know the difference between a gross lease and a triple net (NNN) lease? How about usable vs. rentable space? A Letter of Intent (LOI) is a very important tool to tell a prospective landlord what you want as it pertains to leasing his space. The LOI will outline such things as the length of the lease, the specific rental amount, pass-through costs, and incremental increases in the base rent over the life of the lease. Your agent can help you write a good LOI by asking you the right questions. A Request For Proposal (RFP) is a tool for you to solicit competitive bids from several landlords for the type of space you want or need. With an RFP, you determine basic requirements and get the landlords to give you their best offer to meet your requirements.

If a landlord offers you a “standard” lease, you can bet that all the terms in the lease favor the landlord. You’ll need your own attorney to review any lease you intend to sign. Not just any attorney, but a local real estate attorney who is familiar with the local laws as they pertain to real estate.

Stay tuned for more hints and tips in future blogs.

Your Business Location

2009-04-27T16:59:00.001-07:00

Where would you like to locate your business? There are many factors you may wish to consider. Are you just starting a business or are you relocating your existing business? How much traffic will there be near your business? Is your business the destination or a stop along the way to someone’s destination? Are you interested in purchasing property as an owner/user, or would you rather become a tenant in someone else’s property?

For new business owners, let’s assume that you’ve decided the type of business you want to operate and you choose to lease rather than buy. You’ve arranged for bookkeeping services, talked to an attorney about conducting business in your locality, and have presented your business plan to your friendly neighborhood banker who believes in you and is ready to back your dream. What’s next? You need a place to locate your business!

Current business owners have already taken care of most of the preliminaries facing the new business owner. However, you still have to contact your banker, printer, suppliers, and, most importantly, your customers about your relocation.

How do you decide where to locate? The success or failure of your business could hinge on the location you choose. You will need to find out several things, such as the number of cars passing by and what time of day they pass by your business as well as the demographics of the surrounding area. Of a more immediate concern are things such as zoning ordinances and terms of the lease.

If the current zoning of the location you’re considering permits the use you intend, then you will have the opportunity to negotiate your lease. Depending on the area and type of property, there are different types of leases available. Many commercial lease rates are expressed as a dollar amount per square foot triple net (i.e. $18 SF NNN). To help you figure out your cost per month, simply multiply the price by the square feet and divide by 12. Then you’ll need to add the triple net costs (usually maintenance, taxes, and insurance) that are passed on to the tenant by the owner. There are things that you can do to get the landlord to give you more favorable terms, but I’ll address those in a later blog.

Pat Hallesy's Commercial Real Estate Thoughts

Are you ready to lease a commercial space?

Your Business Location