The dream of every entrepreneur when starting up a business is to own a successful and thriving business. When you have finally succeeded in making your plans a reality, leasing an office space is essential.
A lease is a legal agreement made between you and the tenant, and you must go through the process to avoid future problems that might lead to legal implications.
You can find out more on commercial real estate leasing on the NNN deal finder.
Although, it’s not an easy task to sign up for a lease as there are several factors you’re to be aware of when signing up for a commercial real estate for lease.
Things to Know Before Signing Up a Commercial Real Estate for Lease
Choose the Best Location
One of the essential factors you are to note before signing up for leasing commercial real estate is location. Even though we’re in a technological age, that factor is still important as it is your trade’s heart and soul and your business’ life.
You are to determine what industry will find that location as a high foot traffic region by calculating its nearness to schools, major establishments, government spaces, shopping malls, or crowded residential areas.
Another thing you should worry about concerning your location is if it will be accessible to everyone, including the team members and customers of whoever plans on getting the place on a lease.
Check if the building is near public transport, easy to find, the major landmarks near the area, any financial institutions like banks within the vicinity, access the commercial space via a major road, or if space is hiding within back streets.
Another factor you’re to observe regarding location is checking the public amenities close to the building, like bus stops or train stations. Determine what industry will thrive when leasing that building and which wouldn’t.
Know Your Fees for the Commercial Building You Plan on Signing up for Lease
Always ensure that before you sign up for leasing commercial property, you add an exhibit with the breakdown of all the possible landlord fees you plan to take (rent, percentage rent, management, admin, CAM, insurances, and advertising) for the available commercial property for lease. With this, whatever commercial real estate you plan to use in leasing your commercial real estate will know how much you’re willing to take as payment.
Guaranteed Tenant Improvements
Suppose you are making plans to purchase a commercial property, ensure that you keep an eye out for any guaranteed tenant improvements that the owner owes in the not too distant future. You might prefer not to buy an asset without acknowledging you are incurring a debt to the current tenant base.
Tenant Credit and Financial History
Another thing you are to check out before signing up any of your commercial real estate for lease is checking the credit of the tenant and their financial history. Doing this will help you in understanding the danger of default.
Credit tenants or tenants with great credit and financial history (usually public companies or huge privately-owned businesses) are the most un-hazardous. They will frequently offer more benefits to the property as buyers will often buy at lower cap rates because of the perceived hazard.
Maintenance and Repairs
One of the significant things a person is to check before signing up their commercial building on lease with any commercial real estate agencies is upkeep and fixes. These critical and sudden costs could be inconvenient to the concern of a new or private venture.
For instance, another commercial HVAC unit could cost between $4,000-$7,000, including installation. Accordingly, the tenants should arrange a cap on their cash on hand or discover a warranty set up.
Default/Breach and Cure/Remedy Terms
It is essential to understand the default/break and fix/cure lease language as it is essential for accomplishing any business activity. Surprising events frequently happen at a business property that could affect tasks and terms of the lease agreement.
Understanding the cycle of how to fix/cure a breach of lease terms could be the distinction you’ll observe between a permanent default and an ongoing tenancy.
Consider the Length of the Lease
Another factor you consider before signing up a commercial real estate for lease is the length of the lease. In case you plan on going short-term or long-term, you need to be aware.
If this is your first time going into leasing a commercial building, you need also consider the fate of the startup company. You need to be aware of if the business will flourish within the next year or after two to three years or in the next few years.
Imagine a scenario where you don’t have a startup company and cannot keep leasing in the following few years. What are your accessible alternatives? Remember that once one tenant stops leasing a building and becomes vacant, your inflow of income will come to a halt.
If you think it might not be possible to lease the entire commercial real estate long-term to a particular startup company, you can consider co-working spaces. With this, your cash inflow never gets distorted even though one of the tenants moves out.
You can also determine if it will be a good idea to get the lease extended for a particular number of years at the same rate. You need to be aware of your alternatives when there’s an early exit due to expenses, additional charges, and penalties.
There’s a whole other world to leasing a business space than paying your monthly lease. You ought to factor in several things like upgrades, re-building a current space, or remodeling a territory.
Continuously decide on the state of the space before signing up for a lease for commercial real estate like repainting, moving doors, modifying partitions, adding additional rooms, and so on.
Similarly, it would be best to consider extension, cancellation, and space decrease alternatives. You also ought to have a flexible lease for you and the tenant.
Try not to be reluctant to ask and incorporate corrections inside your agreement that ought to be consented to by the two parties.
Besides, you can always count on a real estate investment trust when you have an excellent NNN deal finder backing you up.