Finding the Perfect Commercial Space: 5 Tips for Your Commercial Real Estate Search
Business Type: The type of business will dictate the type of space you need. For example, a customer focused retail business will require a space that is highly visible and easily accessible to your target market. A manufacturing/industrial business may require a warehouse or flex building with high ceilings, truck doors and ample power supply. Office-based businesses may require a layout with conference rooms and private offices.
Size: The size of your business will determine the amount of space you need. Consider not only your current needs but also any future growth plans. You don’t want to outgrow your space soon after moving in, so it’s important to factor in any anticipated growth or changes in business operations.
Space Condition: When it comes to leasing commercial space, tenants often face the decision of whether to lease a turnkey space or one that needs to be built out to their specifications. A turnkey space is one that is move-in ready, with all necessary infrastructure and finishes already in place. On the other hand, a space that requires build-out may offer more customization options, but it comes with added costs and time delays. Ultimately, the decision depends on your specific needs and goals. If time is a critical factor and the tenant requires a space that is ready to use immediately, then a turnkey space may be the better option. However, if the tenant has specific requirements or a unique vision for their space, then a build-out may be necessary to achieve those goals. It’s important to carefully consider the pros and cons of each option before making a decision.
Budget: When it comes to choosing commercial space, your budget will be a key factor. Consider all of the costs associated with leasing a space, including base rent payments, utilities, taxes, insurance, and maintenance. It is important to understand that lease types influence lease rates. A property offering a full-service lease may include utilities, while a triple-net lease requires you to pay base rent plus expenses and utilities. You’ll want to make sure that you can comfortably afford all expenses while still having enough capital to invest in your business.
- Location is Key
Do your research on the local commercial real estate market. This includes looking at available properties, rental rates, and lease types. It’s important to have a good understanding of the current market conditions in order to make informed decisions and negotiate favorable lease terms. Here are some key factors to consider when researching the market for commercial real estate:
Rental rates: Rental rates can vary widely depending on the location and type of space you’re looking for. Researching rental rates for comparable spaces in the area can help you negotiate a fair lease agreement. You may also want to consider factors such as rent escalation clauses, renewal options, and tenant improvement allowances when negotiating lease terms.
Availability: The availability of commercial real estate in the area can impact your search for the right space. If the market is tight and there is limited availability, you may need to be more flexible in your requirements or consider alternative locations. Conversely, if there is a lot of availability, you may have more negotiating power in lease terms.
Lease types: Commercial leases are agreements between landlords and tenants that allow businesses to use a property for a specific period of time. Commercial leases come in many forms, each with its own benefits and drawbacks. The most common types of commercial leases include Gross (Full-service) leases, Net leases, Percentage leases, and Modified Gross leases. Full-service leases mean tenants pay a fixed rent that covers all the costs associated with the property, while net leases require tenants to pay for specific expenses, such as maintenance or insurance. Percentage leases are calculated based on a percentage of the tenant’s sales, while Modified Gross leases allow for negotiation and flexibility in terms of who pays for specific expenses. Understanding the different types of commercial leases is important for tenants, as it can impact their financial responsibilities and obligations throughout the lease term.
When looking for a commercial property, you should not only consider your current space needs but also your future requirements. If you plan on hiring more employees or expanding your product lines, you’ll need additional space to accommodate these changes. Failing to plan for growth can lead to the need for expensive moves, expansions or renovations down the line, which can disrupt your operations and impact your bottom line. Look for a space that has extra square footage or the option to expand in the future. Additionally, you can look for an owner with a large and diverse property portfolio that may be able to accommodate your future needs.
Finally, be proactive in your real estate search, not reactive. Typically, it is advisable to allow 6-12 months for the process of finding a commercial space and negotiating a lease agreement. For larger or complex transactions, the process may take longer, up to 18 months or more. This allows time to work with your tenant representative to thoroughly research the market, compare properties, and negotiate favorable terms. It also significantly reduces the risk of having to make a decision in a rush or potentially missing out on a desirable property, all while not having sufficient negotiation power.
