Moving into a commercial space can be an exciting and challenging time for a business owner. Whether you’re considering shop buildings for your manufacturing business, mixed-use property for your offices or restaurants rental space for your diner locations, the idea of signing a commercial lease can seem daunting, particularly if this is your first time renting a commercial property.
Many business owners find that it’s helpful to sit down and write out a plan before deciding on leasing a commercial space. It’s often beneficial to first consider if you truly need to rent a commercial property in the first place. Consider your operations, your output capabilities, your employees and your growth expectations when formulating your plan.
Finding And Choosing Business Spaces For Rent
After deciding that it’s time to branch out, whether to a new location or to your first location, you’re going to want to find a commercial property for rent. This can be done in many different ways, but working with a commercial real estate agent may be helpful. The Internet also provides many resources for finding commercial property management companies that can guide you toward properties that will fit your company’s needs.
What’s Involved In Signing A Commercial Lease?
Signing a lease for a commercial property involves the actual signing of lease documents, but it also typically includes additional steps leading up to and following the signing date. Prior to signing your lease, you and/or your business will likely need to undergo a background assessment, income verification and possibly a business plan assessment to determine your risk level. These factors will typically be considered alongside your lease type, the length of the lease and the specific terms you’re seeking.
After signing your lease agreement, you may also need to have regular inspections performed at the property for maintenance, insurance and tax purposes. This can vary based on location and any regulations surrounding your industry or type of property. A storefront for lease may have very different commercial codes that need to be adhered to when compared to a manufacturing location that handles hazardous chemicals.
What’s The Difference Between Commercial Vs Residential Leasing?
Commercial and residential leases are similar in that you are agreeing to occupy a property without assuming full ownership, but a commercial lease is usually broken down differently compared to a residential lease. In a residential leasing scenario, you typically pay rent each month, but the property owner covers taxes, repairs, property maintenance and improvements.
Commercial leasing scenarios may allow for a split between the property owner or management company and the company that is leasing the property. A full-service lease, sometimes known as a gross lease, is a type of agreement in which the landlord of the commercial property pays for taxes, utilities, maintenance and other expenses. The tenant typically only pays the monthly rent in this situation.
A net lease is a type of commercial leasing agreement in which the landlord and tenant split certain expenses, but the tenant pays the monthly rent as well. Net leasing agreements may be single, double or triple net in nature, and each level of commitment involves additional financial obligations to be split.
A modified gross lease is one in which the landlord of a commercial property agrees to pay for things like property taxes, but the tenant ends up paying for utilities, maintenance and some repairs or improvements.
Negotiating Commercial Lease Terms
Negotiation is a crucial component in commercial leasing as operating a business can be unpredictable. Business owners will want to negotiate terms like early termination in the event that a business is sold or non-compete terms to prevent a landlord from leasing nearby commercial spaces to competitors.
It may be beneficial to involve a commercial property attorney in these negotiations to ensure that all parties to a lease agreement fully understand their rights and obligations. This can further protect both the landlord and tenant in the event that a dispute arises in the future.