8 Pro Tips for Effective Commercial Real Estate Leasing – Selecting the best space for your business can have a profound impact both in purely financial terms and in terms of attracting and retaining the best and the brightest talent. From a financial perspective, rent is generally the largest, or second largest expense (following employee compensation) in a company’s monthly budget. Selecting the right amount of space, the most efficient space, and incorporating contraction and expansion rights into your lease can be critical to a company’s future success.
Choosing the right space involves more than just the bottom line. For your employees, clients and vendors, your commercial space creates the first impression they perceive of your company. Selecting the right aesthetics and design can boost employee productivity, morale, and retention. The typical commercial tenant only participates in the lease process every five to ten years. For small to mid-sized tenants who do not have in-house real estate personnel, the process of locating the right space and obtaining the best terms can sometimes be frustrating and somewhat mysterious. The following tips are designed to help you negotiate the process from reviewing your existing lease to moving in.
8 Pro Tips for Effective Commercial Real Estate Leasing
BEFORE YOU DO ANYTHING ELSE REVIEW YOUR CURRENT LEASE.
Your existing Commercial Real Estate Leasing may have provisions requiring you to pay increased rent if you stay beyond lease expiration (holdover), provisions requiring you to restore the premises to its previous condition (restoration), notice requirements relating to options to extend and provisions outlining the landlord’s rights to show your space while you are still occupying it, among others. Know your rights and obligations before you begin searching for new space!
ASSEMBLE A TEAM, A TIMELINE AND A BUDGET.
One of the most important steps in the leasing process is to get all decision makers involved from the outset. Assemble an internal team and appoint one person as the point person. Next establish a timeline and a realistic budget. Finally, hire an experienced tenant representation broker who specializes in representing tenants leasing your property type (office, industrial, medical etc.) in your geographic area. Hiring an experienced tenant representative will save you time and money.
DETERMINE HOW MUCH SPACE IS NEEDED.
The first thing we recommend is to poll existing personnel to determine how often they are on site and how they actually use the space. Office tenants can get a rough idea of space requirements by using an office space calculator like the one on our website at https://mobiliticre.com/commercial-office-space-for-lease/. Keep in mind that not all spaces are equal. Some buildings are more efficient than others and that efficiency will translate into the need for less space. Luckily most large landlords will provide free access to their architect to assist with the space planning process.
WHAT TO DO BEFORE YOU TOUR SPACES.
If at all possible, include all members of the decision-making team on the initial tour. Frequently the most desirable spaces lease quickly, and you want to be certain that your team can move quickly. Your tenant representation broker will typically provide you with a booklet outlining relevant details for each space you will tour prior to the actual tour. If possible, review that booklet prior to touring.
While touring be sure to ask the landlord’s broker if the building can accommodate any special needs and ask any questions you may have regarding the space and the building. Make sure to investigate things such as parking, ingress and egress to the building, elevators, bathrooms, tenant mix etc. Lastly, as if other tenants have already received offers for the space. There is nothing worse than spending a lot of time negotiating for a space only to have it leased by another tenant who toured before you.
COMPARE OPTIONS AND PERFORM A FINANCIAL ANALYSIS.
Following the tour you will select from the most attractive options. We recommend selecting a minimum of two and preferably at least three options to compare. Once options are selected, your tenant representative broker will prepare a Request for Proposal from the various landlords. Keep in mind that the initial landlord proposals do not necessarily reflect a landlord’s best offer. Once all landlord responses are received, your tenant representative broker will encourage the respective landlords to offer better terms in order to win the business. Once all final offers are received your tenant representative broker will prepare a financial analysis comparing the true cost of each option selected.
NEGOTIATING THE DETAILS OF YOUR LEASE.
Once you have narrowed your selection to your preferred choice it will be time to request a draft lease from your prospective landlord. While your commercial real estate broker will review the lease to ensure that all of the business points in the lease reflect those previously agreed to, we cannot stress how important it is to have the lease reviewed by an attorney.
You will be living with this lease for a long time, and it is important that from a legal perspective you obtain the best terms possible and that you understand all of the provisions in the lease. While a complete discussion of various lease provisions is beyond the scope of this article, you can read such a discussion in our tenant guide at https://mobiliticre.com/tenant-guide.
HOW TO GET THE TENANT BUILDOUT YOU BARGAINED FOR.
For most tenants in the Tampa Bay area (excluding large, sophisticated tenants or those in the construction industry) it makes sense for the landlord to be responsible for all tenant improvement work. By placing the landlord in charge, tenant can avoid liability for construction delays and cost overruns. Rent will not commence until the space is complete.
Prior to submitting a leasing proposal to a tenant, the landlord will typically request that the tenant mark up a floor plan of the space indicating all requested work such as relocating walls, installation of electrical outlets, lights etc. Landlord will then either simply forward that drawing to landlord’s architect, or in some cases tenant might meet face to face with landlord’s architect.
Once the design is finalized landlord will submit the design to one or more contractors for pricing. The amount of the tenant improvement allowance the landlord is willing to pay for will depend on a number of factors such as the length of the lease, tenant’s credit and materials selected. It is imperative that tenant gain approval of the final design prior to signing a lease as any subsequent changes made by tenant that increase costs will typically become the responsibility of tenant.
Relocating a business can be more complicated than one would initially expect. Ensuring that you hire the right moving company is critical. Your moving company will often be your most important initial contact with your new landlord, and it is important that the moving experience be a positive one for all parties involved. It is often helpful to ask for mover recommendations from your existing landlord and your new landlord. They may also have recommendations for IT companies.
We hope that these tips have given you a basic understanding of the commercial real estate leasing process. If you have any questions regarding commercial real estate do not hesitate to reach out to us.
At Mobiliti CRE we focus 100% on representing tenants with relocations, expansions, contractions, and subleases throughout Tampa Bay and the entire State of Florida. We also assist businesses that are looking to purchase office, medical office, flex and industrial space. Reach out to us for assistance with all of your commercial real estate needs at (813)-300-2227 or email us at email@example.com