Leasing commercial property can be confusing for business owners, but there are some things you can educate yourself on. Here are eight valuable tips to know when leasing commercial properties.
- Understand what your rent is. You need to know exactly how much money you will be paying on rent. Commercial real estate is often calculated on an annual, per square foot method. For instance, if you are leasing a 1000 square foot space for $10.00 per square foot, annually, your rent per year would $10,000.00 per year. Your monthly rent would be approximately $833.33.
- Know your options. In the lease, there will be a section that lists if you have any options. If you have a three-year lease with two, three-year options, you can lease that property for a total of nine years, but can opt out at the expiration of each option.
- Increases are standard in most commercial leases; however, tenants need to understand the terms. You may have a lease with a 1% increase annually, which means that you will pay 1% more in rent the second year than you did the first year. In the third year, you would pay 1% more than you did the second year, and so forth.
- Ask up front what your pass-through charges are. Landlords want to recoup as much of their property taxes, insurance and maintenance charges as possible, so they will have a pro-rata share calculated for each unit. You will be responsible to pay your portion of the insurance, property taxes and maintenance for the building in addition to your rent. You should request to see proof of supporting documents at the beginning of each year.
- Responsibility needs to be understood. When leasing commercial property, make sure you know exactly what you, as a tenant, are responsible for. Some landlords will require tenants to take responsibility for HVAC units, structure and many other elements, however, some keep all the responsibility.
- Utilities need to be clearly defined. If your landlord is paying for utilities, make sure it is part of the lease. If not, you need to estimate your cost to run electricity, water, and other utility systems.
- Some properties allow you to have exclusivities, which means, if you are opening up a salon in a small shopping center, you can request for no other salon to be allowed in the center as long as you are occupying your space.
- It is best advised to always have an attorney read your lease before signing. Sometimes they will catch concerning verbiage in the lease that you may not otherwise understand.
Follow these easy, but very valuable tips when leasing commercial space and you won’t be caught off guard by random costs. It is also a good idea to read as many articles on commercial leases as you can before signing a lease.