How to Choose Commercial Rental Space

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Before starting your search for commercial space or choosing a broker, it’s a good idea to set clear priorities, so that you don’t waste your time looking at inappropriate properties. Here are some of the main issues to consider.

Rent and Other Costs

Put a realistic cap on the amount you’re prepared to pay, including rent, real estate taxes, utilities, insurance, parking, and other costs such as common area maintenance (if you rent in a multitenant building). Don’t forget to include money you may need to pay upfront for a security deposit or for improvements to fix up the space to your specifications.

Location

The physical location of your business is likely to be important to you, your employees, your customers or clients, and/or your suppliers—for example, if you have an upscale restaurant, you may want to lease space in the theater district or near expensive retail shops. On the other hand, if you run a small consulting business where clients do not visit your office, a particular neighborhood may not as important as commute time from your home.

Length of the Lease and When It Begins

If you need to find a place right away, you’ll have fewer options than if you have the luxury of shopping around until you find the perfect space. Depending on your business needs, you may want the security of a long-term lease (a year or more), especially if you want to minimize improvement costs and build a faithful customer base in a particular location. Or you may prefer the flexibility of a shorter rental agreement (even month-to-month)  if you are just testing the waters of your new business and don’t want to make a long-term commitment.

Size and Physical Features of the Space

Try to be as precise as possible regarding your minimum and maximum space requirements.  If you’re moving an existing business because your present rental is too small, you’ll probably have a clear idea how much space you will need. You’ll be less sure if you’re starting a brand-new enterprise. Professionals known as “space planners” can help determine how much square footage you need and how to use it.  

Keep in mind that landlords measure square feet in different ways, and this can result in significant differences in the amount of real or usable space (and the amount of rent you pay). Also, when considering various spaces, be sure to factor in the possibility that your business might need more space in the future—for example, if your hair salon becomes popular and you want to add more services. Also, if downsizing is likely (maybe you plan on outsourcing some of your business functions in the coming years), you don’t want to lock yourself into too large a space.           

In addition to overall size, be clear about your interior needs and the ideal configuration of space you need—for private offices, storage, meeting rooms, restrooms, or a small kitchen for employees. If your business relies heavily on computers, technological capacities may also be important. Some of these features can be customized to fit your needs, while others cannot.

Other Tenants and Services in and Near the Building

You may want to be in a building with certain types of tenants—for example, businesses that are complementary to yours or provide a needed service. Health-care professionals may want to be near a hospital, pharmacy, or x-ray lab. Or you may want to find a building that houses a health club, coffee shop, or a fast copy service that you, your employees, or customers will find handy.

You may also want to stay away from buildings that copntain certain types of businesses, such as those that compete with yours, or that are next to businesses that you want to avoid For example, if you run a children’s dance studio, you probably won’t want a bar as your next door neighbor.

Parking, Building Security, and Other Business Needs

A wide range of other features may be important to your choice of business space, depending on the number and type of clients and customers who visit your property. These include: ample parking in or near the building; building security (adequate strong locks, alarm systems, and even security guards may be important  if your business is open late, handles large amounts of money, or is likely to be attractive to a burglar); the image you want to project; and visibility and signage (if your business depends on drop-in trade from pedestrians and motorists, you’ll want to make sure that the space you’re considering is visible from the sidewalk or street).

Expansion Potential

If you plan on growing your business within the next year or so, you may want commercial rent space with the potential for expansion. You’ll save yourself the hassle and expense of another search and move to new space, you may be able to nail down your right to occupy additional parts of the building in an expansion clause giving you the right of first refusal when space opens up.

This article was excerpted from Negotiate the Best Lease for Your Business, by Janet Portman.

by: , Attorney

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