The Right Commercial Real Estate for You
What to consider when you're looking for commercial space.
You probably don't have unlimited time available to choose a business space, so you need to make the search process as efficient as possible. This means you'll want to focus on the space that meets your highest priorities. Don't waste time on places that are overpriced, too small, or in second-rate locations. Follow these tips on how to ask the right questions and look in the right places for any space you're seriously considering.
1. Come prepared. Make an appointment with the landlord's broker and come equipped with a street map, notebook, pen or pencil (or your laptop or handheld computer), pocket calculator, tape measure (to make sure your square footage computations match those of the landlord and to check if your furniture or equipment will fit), graph paper, and a digital camera.
2. Evaluate the outward appearance. Look carefully at the impression the building will make on your customers and clients. If it looks shabby to you, it will look shabby to others, though appearances don't count in some businesses. For example, customers won't expect a salvage yard to be spic and span -- they'll be delighted if the yard has what they want, no matter what pile it's found under.
3. Check for defects. Watch for obvious problems such as loose steps, torn carpet, missing floor tiles, or light fixtures that don't work. Defects that you can easily remove, fix, or cover are less important than those that are expensive to repair or over which you have no control, such as a poor roof.
4. Evaluate security. Think about how secure the space is in view of the crime history of the neighborhood and the likelihood that your business will be a target. Make sure the doors and locks are in good shape and sturdy enough to deter would-be intruders. Visit a potential site at different times of the day and evening. Is there adequate street and other lighting? Are there any other business establishments open in the evening? Is it going to be safe in the evening if you or your employees are working late?
5. Examine the heating, cooling, and ventilation systems. Find out if there is adequate ductwork to serve all areas, including those that might be enclosed by new walls. Note where the thermostat is located and if there are multiple thermostats for different zones. Determine if you can control the temperature. And make sure that heating, cooling, and ventilation are available outside of normal working hours if this is important to your business or to your business equipment.
6. Evaluate access and convenience. Walk around the building and check out the elevators, stairways, storage areas, and lobbies. Think about whether disabled people will be able to make their way around without unusual difficulty (you may be obligated to make the space accessible under the Americans With Disabilities Act). Investigate the parking situation and, in the case of on-site parking, observe how convenient the space is, whether it's crowded, and whether spaces are set aside for individual tenants in multi-tenant buildings.
7. Consider improvements. Assuming that the space has some possibilities for you, try to evaluate how difficult (and expensive) it will be to fix any problems. Cosmetic changes such as painting the walls are easy and inexpensive. Installing a much wider entry door or reinforcing the floor to accommodate your equipment may be more difficult and costly if it involves structural changes. While tenants and landlords often negotiate substantial improvements in the space (sometimes landlords give tenants money to accomplish these changes, called an "improvement allowance"), it's normally better to deal with space that requires relatively little renovation.
8. Investigate zoning compliance.Once you decide that a particular space holds promise, think about local ordinances, which can affect your ability to use the space the way you'd like to. For example, a zoning ordinance that allows offices in a certain district may not permit retail uses, and vice versa. The landlord or broker should be familiar with how the property is zoned. Still, it pays to check with a zoning official at City Hall -- they're usually part of the planning or building department -- to confirm that the space you're considering is zoned for your business. If the zoning provisions exclude your business, you may decide to try to get an exception (called a variance ), but you'll probably need some legal assistance. Like counting your chickens, it's almost always a bad idea to sign a lease before a variance is a reality.
9. Plan for licenses or permits. Depending on the nature of your business, you may need to get a special permit or license before you can open shop. (Don't confuse zoning with permits: Zoning laws regulate where a business can set up shop; permits and licenses control whether they can go into operation.) If you plan to open a restaurant, for example, you'll need to be sure your kitchen gets health department approval and perhaps fire department approval as well. You may also need a liquor license. Before settling on a particular space, find out how long it will take you to obtain these permits -- you don't want to commit to a space and then not be able to open up because you're waiting for permits.
10. Consult with experts if necessary. Your careful visits to a prospective site should give you a good sense of the space's physical condition, but sometimes you need information from someone more experienced in structural matters -- for example, a structural engineer or architect. Getting expert advice is wise if you think you'll need substantial renovations -- you need to know if the proposed changes are feasible and can be done at reasonable expense. Also, if your lease will require you to pay some or all of the maintenance and repair costs, you'll want an expert's opinion on what to anticipate. This information will also be invaluable when you negotiate with the landlord over who pays for your improvements.
To learn more, see Nolo's section on Business Spaces & Commercial Leases.