|COMMERCIAL REAL ESTATE LEASING TIPS
If you are involved in leasing commercial real estate in any capacity whatsoever - whether experienced or a novice - you'll find the information and
tools offered at this site to be a powerful resource.
Here you'll find tips, techniques and strategies for leasing commercial real estate as well as comprehensive information about every critical aspect
of the actual process itself.
Without question, this web site is the information source for learning how to understand, negotiate and administer a commercial lease.
It's a basic fact that almost every business enterprise will enter into a lease for some type of commercial space every three to five years. Available
education on the subject of leasing has, up to now, been lacking and very hard to come by.
You'll find this site to be one of the few places where you can easily collect the information you need and find the answers to your questions... on the
entire process of leasing space, from start to finish.
You'll find that this site offers valuable information and "real-world" knowledge and techniques for leasing commercial space that even highly
experienced professional have found invaluable. Leasing commercial real estate is a process...a lot of ideas and knowledge that combine into a
successful lease agreement that meets the needs of all the parties involved. To that end, this site also provides the knowledge necessary - for you,
your employer or, as the case may be, your client - to respond appropriately to the issues of significance surrounding the more important and/or
most misunderstood lease clauses.
The first thing you need to do is to add this site to your bookmarks. This way you can repeatedly take advantage of the powerful techniques, tips, and
strategies that you will find throughout this website. You can be assured that your time here will be well spent and that you will be both educated and
enlightened, no matter your level of experience.
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THE PROCESS - LEASING COMMERCIAL REAL ESTATE
Visitors to this web site include, in addition to brokers, a mix of landlords, tenants and their real estate advisors, such as attorneys and insurance
agents. In every case, it is important to first ensure that each visitor is properly grounded in a base level of knowledge.
Since the process itself begins with an evaluation of the tenant's own needs, continuing to look at the process from the tenant's perspective has
proven to provide a continuity that is otherwise difficult to achieve. Those of you more involved with the landlord's interests will find that developing a
full understanding of the process, from a tenant's perspective, will ultimately save money, time and wasted effort.
One of the core concepts of a successful negotiation requires that each party have knowledge and empathy with regard to the significant issues faced
by the other. To that end, you will notice that, whenever possible, a balanced perspective is provided on issues typically affecting negotiations
between the landlord and tenant.
The following outlines the key components of a tenant's successful campaign to relocate their business operations:
Understanding Commercial Leases
Before you rent space for your business, be
sure you understand these basic facts about
Renting commercial space is a big responsibility
-- the success or failure of your business may
ride on certain terms of the lease. Before you
approach a landlord, you should understand
how commercial leases differ from the more
common residential variety. And before you sign
anything, make sure you understand and agree
with the basic terms of the lease, such as the
amount of rent, the length of the lease and the
configuration of the physical space.
How Commercial Leases Differ From Residential
It's crucial to understand from the get-go that,
practically and legally speaking, commercial
leases and residential leases are quite different.
Here are the main distinctions between them:
Fewer consumer protection laws. Commercial
leases are not subject to most consumer
protection laws that govern residential leases --
for example, there are no caps on security
deposits or rules protecting a tenant's privacy.
No standard forms. Many commercial leases are
not based on a standard form or agreement;
each commercial lease is customized to the
landlord's needs. As a result, you need to
carefully examine every commercial lease
agreement offered to you.
Long-term and binding. You cannot easily break
or change a commercial lease. It is a legally
binding contract, and a good deal of money is
usually at stake.
Negotiability and flexibility. Commercial leases
are generally subject to much more negotiation
between the business owners and the landlord,
since businesses often need special features in
their spaces, and landlords are often eager for
tenants and willing to extend special offers
Making Sure the Lease Will Fit Your Business
Before you sign a lease agreement, you should
carefully investigate its terms to make sure the lease
meets your business's needs.
First, consider the amount of rent -- make sure you can
afford it -- and the length of the lease. You probably
don't want to tie yourself to a five- or ten-year lease if
you can help it; your business may grow faster than
you expect or the location might not work out for you.
A short-term lease with renewal options is usually
Also think about the physical space. If your business
requires modifications to the existing space -- for
example, adding cubicles, raising a loading dock, or
rewiring for better communications -- make sure that
you (or the landlord) will be able to make the
Other, less conspicuous items spelled out in the lease
may be just as crucial to your business's success. For
instance, if you expect your camera repair business to
depend largely on walk-in customers, be sure that your
lease gives you the right to put up a sign that's visible
from the street. Or, if you are counting on being the
only sandwich shop inside a new commercial complex,
make sure your lease prevents the landlord from
leasing space to a competitor
Critical Lease Terms
The following list includes many items that are often
addressed in commercial leases. Pay attention to
the length of lease (also called the lease term), when it
begins and whether there are renewal options
rent, including allowable increases (also called
escalations) and how they will be computed
whether the rent you pay includes insurance, property
taxes, and maintenance costs (called a gross lease); or
whether you will be charged for these items separately
(called a net lease)
the security deposit and conditions for its return
exactly what space you are renting (including common
areas such as hallways, rest rooms, and elevators) and
how the landlord measures the space (some
measurement practices include the thickness of the
whether there will be improvements, modifications
(called build outs when new space is being finished to
your specifications), or fixtures added to the space;
who will pay for them, and who will own them after the
lease ends (generally, the landlord does)
specifications for signs, including where you may put
who will maintain and repair the premises, including
the heating and air conditioning systems
whether the lease may be assigned or subleased to
whether there's an option to renew the lease or
expand the space you are renting
if and how the lease may be terminated, including
notice requirements, and whether there are penalties
for early termination, and
whether disputes must be mediated or arbitrated as an
alternative to court.
Developing a Negotiating Strategy
How much clout do you have? Your ability to
secure a favorable lease depends on the
state of the market. If there are lots of
vacancies in your area, you’ll stand a better
chance of landing the rental on advantageous
terms than if space like this is scarce.
Should you sign a letter of intent?
Sometimes when landlords and tenants are in
the midst of serious negotiations, they want to
put their understandings down on paper -- but
they usually don't expect that their writings
will be the equivalent of a lease. A letter of
intent is just that -- a communication
indicating what the landlord and tenant would
like to see happen in a lease. If the landlord
asks you to sign a letter of intent, you should
sign it to show you're serious about the
space. But take care to make it clearly
nonbinding, or else it can end up obligating
Are you aware that there is no such thing as a
"standard" business lease?
Unlike many other aspects of business, there
are surprisingly few legal constraints on what
tenants and landlords agree to do.
Commercial leases can and should reflect the
give-and-take between the landlord and
tenant -- one size simply doesn't fit all. Even if
the landlord starts with a form that's accepted
by other tenants who lease from this landlord
or printed and distributed by a big real estate
management firm, it can always be modified.
Negotiating the Lease
Is the landlord asking for a "gross" or a "net"
lease? In a gross lease, tenants pay a set
amount per month, much like a residential
lease. Depending on whether a whole building
or part of one is being rented, the tenant will
also pay all or a portion of the utilities. In a net
lease, tenants pay for their square footage,
plus a portion of the landlord's operating
expenses, including the building insurance
and taxes, plus utilities.
How long do you want your lease to last?
Commercial leases typically last from two or
three years to ten or fifteen. Only well-
established businesses should commit to very
long lease terms.
Do you need a lawyer to review your lease?
Paying for a few hours of a lawyer’s time is
usually a very wise move. The lawyer may spot
potential problems that you may not have
thought about. Look for someone who has
represented you (or someone you know)
successfully in the past, or ask other business
people whom you respect for
Renting Real Estate for Your Business: Overview
To get the best space for the best price, do your homework on business space and commercial leases.
Your business has become successful, and you're ready to move into a better place. Or you’ve decided to streamline your operations and rent a more efficient space. Perhaps your home business is bursting out of the garage
and needs its own location. Whatever your reason for seeking to rent a space for your business, it's important to understand as much as possible about commercial leases to get the best space for the best price.
As you enter into the process of searching for and renting office space, the following pointers will help you.
Determining Your Needs and Setting Priorities
What kind of space do you need? Commercial space comes in a multitude of sizes and configurations, from the to-be-built building to a plain-vanilla office suite to a quirky older building. If you know what you're looking for, you
can efficiently go after it.
Where do you want to be located? Being in one part of town may be important; but if it's not, you will have more to choose from.
Is appearance important to you? If you're dealing with the public, the outward show of the building will no doubt matter.
Do you want to be located near other businesses that complement yours? Sometimes it's a plus to be among your own (such as in the "high tech district").
What kinds of services do you want near your place of business? You may conclude that you and your customers or clients will benefit from certain close neighbors -- a dentist, for example, may want to be within walking
distance of a special X-ray lab.
Finding and Evaluating Space
Can you find a space on your own? In markets that are hot or sophisticated, you may need the help of a broker, who may have contacts that tenants won't know about. It's best to work with a broker who represents mainly
tenants. Think very carefully before working with a broker who also represents the landlord -- such dual representation will rarely be to your benefit.
How does the landlord measure square feet?
Believe it or not, it’s perfectly acceptable to include the thickness of the exterior walls, and even the interior walls, stairwells, and elevator shafts, in square foot measurements. Make sure you know how your landlord
computes your rented space.
Does the place require percentage rent?
In a percentage rent situation, you pay for the size of the rental, plus a portion of your profits once they exceed a certain amount. In essence, you are sharing your income with the landlord when you reach that point of
profitability. Large retail operations are typically the only tenants who pay percentage rent.
How much can I raise the rent on a commercial sublease?
Is there expansion/purchase potential?
Looking down the line, you may be thinking about the possibility of buying your own building. One way to determine whether a location should become a permanent one is to lease with an option to buy, which is a particular type
of rental arrangement to be on the look-out for.
COMMERCIAL LEASE: Before you rent space for your business, be sure you understand these basic facts
about commercial leases.
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