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3 Fatal Mistakes to Avoid When Leasing Commercial Space

Don’t Make These Mistakes When Leasing Commercial Space

Leasing commercial real estate is often a new experience for business owners.

After all - there aren’t too many times throughout your business’s life that you’ll be relocating, opening another location, or renegotiating your current lease.

Especially if you’re a small business owner.

Landlords, commercial real estate brokers, and attorneys deal with commercial leasing on a day to day basis, which give them an advantage over you unless you approach your lease the right way.

Your business's location and lease can have a significant impact on your success.

Be sure to steer clear of these fatal leasing errors. 


Mistake 1: Underestimating The Time It Takes.


Is your current lease term coming to an end?

Or are you thinking of opening a new business?

Depending on how active your market is and what industry you're in, finding a new location could take anywhere from one week to months or even years.

Your timeline doesn't end once you've set your eyes on a site - you still have to negotiate the lease and give yourself additional time for Tenant Improvements (build-outs).

Take your time so you can get the right deal for your company - don't get caught in a situation where you have to make a decision too fast!


Solution:

Be sure to allot yourself enough time to find a new space, negotiate a deal, and complete any additions/alterations.

I highly recommend at least three months' lead time, which for most businesses should be plenty.

However, I have been involved in deals that took 4+ months to negotiate terms and finalize construction and I much prefer to be on the safe side.

Start reviewing your options 6-12 months out and have a thorough, concise strategy for re-entering the leasing market.


Mistake 2: Not Negotiating The Lease.

Landlords are very aware of how to indemnify and protect themselves in the lease.

They have spent a lot of time and money crafting the contract to protect their best interests, not yours.

Negotiating a lease won’t seem like second nature to you (like it is for landlords) unless you’ve done it before, so educate yourself and know how to approach the situation.

Solution:

Whether you’re looking for retail, office, or industrial space, every lease is negotiable.

Each minute detail in a commercial lease, from length of term to how much of the construction the landlord will provide, can be removed, altered, amended, or added.

An empty space can be very expensive for a landlord, so they are typically willing to give more concessions on a longer lease to avoid dealing with such vacancy again in the near future.

Want a kitchenette installed?

Need a few walls removed?

What about street signage and brand visibility?

Ask for it.


Mistake 3: Flying Solo.

Running your business is already difficult enough without throwing in market research, site selection, lease negotiations, and everything else commercial real estate can throw at you.

The landlord’s business is commercial real estate, which gives him a serious edge during negotiations.

You wouldn’t go to trial without a lawyer, right?

The same applies to commercial real estate.

Solution:

Put together an all-star team that has fiduciary responsibility to you.

I recommend a tenant broker (which is at no cost to you; the landlord typically pays their fees), a real estate lawyer, and a CPA.

Tenant brokers should know of deals that are off-market, which can lead to negotiating a better deal.

These brokers deal with commercial leasing every day.

Many have taken advanced classes on contract negotiation and know the little details that could make or break your business.

After the broker has helped you determine the right location and made his recommendations of lease additions or alterations, a lawyer will scour the text to make sure you are protected legally.

CPAs will help you run the numbers and determine what your budget should be, which will be site specific.

Remember that the right location can make your revenue skyrocket.


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