Renting a Commercial Space

Renting a commercial space is different from renting a home. Unlike the residential one, the commercial property market is not standardized. As a result, leasing commercial property can be a difficult task without help from experts.

Renting commercial property is a major responsibility because specific lease terms might determine whether your business succeeds or fails. Before approaching your agent about commercial spaces, make sure you understand the difference between renting a residential and commercial space.

5 things to do before renting a commercial space

Renting the wrong commercial property can be a costly mistake, which is why you should be prepared and follow the following tips:

1. Research the location

Does the location have the market for your business? Is the foot traffic enough to sustain your operations? Is the location accessible to your suppliers? Will there be parking space for your customers? How is the security in the area?

Researching and investigating the area where you plan to operate your business is one of the first and most important things you should do before renting a commercial space. The overall atmosphere of the neighborhood and the behavior of the customers will forecast if your business will succeed or fail in that location.

2. Go through the lease agreement

Signing a commercial lease agreement without going through all the details poses a serious risk, because some agreements benefit the landlord more and could put you and your business in a tough bind later on.

One must make it a point to study the lease agreement carefully and read through it clause by clause. Also, have a draft of the agreement reviewed by your lawyer. Make sure your rights and obligations as a renter are clearly stated in the contract.

3. Negotiate the terms

These commercial real estate lease categories are not absolute; they might offer you a sense of what to expect with the cost and the clause. Keep in mind that each contract is unique and negotiable.

When renting a commercial space, the extent to which you can negotiate can be astounding. Don’t have any second thoughts in negotiating, not only the rent amount, but the leasing clauses that you’re uncomfortable with. Read the fine print and discuss it with your commercial real estate expert and attorney before signing.

4. Check for an expansion clause

An expansion clause in a commercial real estate lease gives the tenant guaranteed or  preferred rights to grow inside the building or portfolio from which they are leasing. If necessary, conditions for future expansion of the commercial space must be included in the lease agreement. After all, you never know when your company will require changes or property expansion.

Having the cost and scope of additions that can be made when needed in writing can thus be useful afterwards.

5. Do your due diligence

When looking to lease a commercial space, keep an open mind and be prepared to look at various properties. Don’t just look at one space; there are others in the area that could be a better option for your business.

Check the various other expenses that come with the property. Usually, in commercial leases, the upkeep, maintenance charges and are shouldered by the renter.

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Different commercial lease agreements

It is also helpful to understand the available types of commercial lease agreements.

1. Full-service leases

In a gross lease or full-service lease, the tenant pays the base rent while the landlord pays the utilities, insurance, taxes, and other operating costs of the building. 

2. Net leases

In a net lease, the tenants pay a percentage of the building’s operating costs. There are three types of net leases: single, double, and triple net.

In a triple net lease, the tenant pays not only the rent, but also the building’s running expenditures. As a result, the rent should be lower, but variable costs will be greater.

The tenant pays for utilities, insurance, and taxes in a double net lease, while the landlord or property owner is responsible for structural maintenance.

Lastly, in a single net lease, the tenant is responsible for paying the rent and utilities, while the landlord is responsible for insurance, taxes, and upkeep.

3. Absolute NNN leases

Absolute NNN leases, or bondable leases, are less frequent in which the tenant pays for all building repair costs, such as roofing.

4. Percentage leases

Finally, percentage leases require the tenant to pay a proportion of retail sales in addition to the base rent. These are most commonly found at shopping malls.

Conclusion

Commercial leases have a longer length and are more complicated than residential leases. You need to consider a lot of things before you can find a good fit for your business. Before you decide to sign anything, it’s recommended that you first consult a commercial space expert.

If you live in Florida and need professional commercial real estate services, the Vision Group can help you. Do send us a message so that we can assist you with your real estate concerns.

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Mike Padgett with The Vision Group leads the industry building luxury custom homes in Sarasota Florida.