The Effect of Tech/Creative Tenants on Office Leasing

The Effect of Tech/Creative Tenants on Office Leasing

The companies that are among the most prominent tech and creative companies in the world have had an impact on society so massive that it has never been seen until now. They have made a point of making sure that no one today can do without their products, and have improved the general quality of life for many people. Despite the incredible effect they’ve had on the world, at least three of today’s ten largest companies by market capitalization are relatively new. Amazon incorporated in 1994, and it’s actually the oldest of the three. Currently its the sixth largest company on the list. Next came Google in 1998, and it is number two in market capitalization. Facebook, the fifth on the list, came next in 2004. These businesses and others mark a new era of companies, and they have been at the forefront of drivers of rapid leasing activity. They are not only expanding in their primary markets, but also taking advantage of lower real-estate costs and spreading out to secondary markets.

Another indication of how fast things are changing among tech companies is the fact that most of the 162 private companies worth $1 billion or more reached that billion mark in the last three years or less. The oldest one made the list in 2009. These companies are listed on the CB Insights Unicorn List.

Firms that have shown up in the last twenty years have been leasing more office space as they’ve grown. They have had a profound impact on the leasing of office space. These creative and tech companies are defining trends in leasing, despite the prevalence of more traditional companies in the leasing market in the past, and they are beginning to affect other sectors. These companies are even taking Boston and New York by storm, despite the fact that historically the majority of their office spaces were leased by more traditional industries, even as other cities hosted more and more creative and tech companies.

As a result, the commercial real estate market is experiencing a boom. In 2015 the absorption figure reached the highest it had been in a decade, 86.7 million feet of absorption. On the other side, vacancy declined 70 basis points, falling to 12.5 percent from 2004 to 2005. The vacancy rate is the lowest it’s been since 2008. The majority of the change is due to Creative/ Tech companies. Salesforce.com leased 300,000 more square feet in New York. The building is to be renamed Salesforce Tower New York. Amazon went from 8.3 million square feet in the Silicon Valley and San Jose to another 11 million square feet in Seattle. Facebook also added another 275,000 square feet. According to experts, almost all of the net absorption of commercial leasing space has been due to the new Tech and Creative companies.

Creative companies and tech companies, companies mostly staffed by and strongly related to millennials, are taking the world by storm. They’ve had an exceptionally significant impact on the amount of office space leased, and it looks like they will continue to in the future.

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History of Clifton Park, NY

history-of-clifton-park-ny

Nathan Garnsey House, Clifton Park NY (1791)

Clifton Park is a township in the state of New York, located in Saratoga County. The town is located in the southern reaches of the county, only approximately 12 miles from Albany, the state capital. The southern border of the town is marked by the Mohawk River, where much of its history originated.

The history of Clifton Park dates back to Dutch settlements in the area, but prior to European settlers, the area was home to Native American tribes. The Mohicans and Mohawks lived in the area and referred to it as Canastigione, or “corn flats” because they grew corn along the shores of the Mohawk and Hudson Rivers.

History of Clifton Park, NYEventually European settlers came to the area and settled nearby in what was then just Halfmoon. The Dutch began to cross over to the area that would later split to become Clifton Park and Halfmoon within the late 1600s. Families traveled across the Mohawk River from the Schenectady area, creating more permanent settlements.

Lord Cornbury, also known as Edward Hyde, the 3rd Earl of Clarendon, was awarded the title of Governor of New York in 1701 after his support of William III of Orange in the Glorious Revolution. One of his duties was to grant land patents, and he and other European authorities began to grant land patents in the area around Clifton Park.

The area that would become Clifton Park was named by Nanning Harmansen in 1707. He wrote to Lord Cornbury for Letters of Patent when Harmansen had purchased the area from the indigenous peoples who were originally living in the area.

Travel around the area became more commonplace, as settlers began using the Dunsbach Ferry in 1710. Eldert Vischer established Vischer’s Ferry on the shores of the Mohawk River. An important place  in the community, Amity Church was established as a place for the area’s Dutch community to worship, rather than needing to travel across the river to the Niskayuna Dutch Reformed Church.

Amity Church was a center of the community, and it eventually had to be replaced with a larger structure for its congregation. In 1871, a new Amity Church was built, but it was destroyed by fire less than two decades later. The congregation built a new church on its location in 1888, which still stands as a historic site.

As of 1723, a census shows that there were at least twenty settlers living in the area, which was still referred to as Canastigione. The site became important historically with famous visitors, such as George Washington.

Nicholas Fort maintained an area on the Mohawk River known as Fort’s Ferry. He also had a public house prior to the American Revolution. George Washington traveled across the river by ferry at this location and supposedly stopped at Fort’s tavern while he was in the vicinity in 1783, during his northern tour.

Before long, transportation would lead to the town’s expansion. The Erie Canal opened in 1825, and Halfmoon was on its shores. With its burgeoning popularity, the town got too large to maintain at its size, and Clifton Park split from Half moon on March 3, 1828. The town’s initial name was Clifton, but it became Clifton Park on March 3, 1829, when Clifton Park took the name of the 1708 Clifton Park Land Patent.

Clifton Park had its first town meeting in 1828 at Grooms Tavern. This location has remained a major historic feature of the town, initially starting out as a grocery store. It was a popular shopping spot for local families, until it became a tavern in 1828 run by James Groom.

As a major center of town life, James Groom became an important figure in the town’s history. Multiple meetings occurred annually at Grooms Tavern, and Groom himself served as town clerk from 1832 to 1835. He was also the town supervisor from 1836 to 1837. Groom’s son added several businesses to what would become the Grooms Tavern Complex, including a blacksmith’s shop and a wagon repair business.

Grooms Tavern went through several incarnations, including turning back into a store, before it was eventually bought by the Town of Clifton Park. Since 2007, it has served as a historic and cultural center, with the downstairs restored for future generations.

Clifton Park maintained itself as an agricultural town for many years. Commerce and visitors came via the Erie Canal, while mills were built along the Mohawk River. Many people had farms and even apple orchards, as the Macintosh apple was developed here and introduced to the world.

Churches began to be built throughout the township of Clifton Park and were found in many different denominations. One-room schoolhouses were also built, and these aspects of daily life anchored the families in the region. The schools were brought under the auspices of the Shenendehowa Central Schools in 1950, which helped unify the area.

In the 1960s, a major change happened in Clifton Park. The Adirondack Northway, also known as I-87, was built and connected Clifton Park to cities, including the capital city of New York, Albany. What was once an arduous journey became an easy commute for residents of Clifton Park, especially as bridges took the place of the Erie Canal system.

There are several major hamlets found within Clifton Park, and many of them have a basis in the town’s history. Grooms Corners contains the Grooms Tavern Complex, as well as the Mohawk Valley Grange Hall, both places on the National Register of Historic Places. In the southern part of the town, you can find the hamlet of Vischer Ferry along the Mohawk River. Rexford was the location of Rexford Flats, located along the western edge of town and the Mohawk River.

Nowadays, you can find just about anything you’re looking for in Clifton Park. It has a bustling business atmosphere, but you can travel a little way outside of the city and go picking apples at one of the local orchards. In addition to historic sites, such as Amity Church, you can find plenty of recreation options for your family.

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Open Plan Offices – A Failed Experiment?

Open Plan Offices - A Failed Experiment?

If you’re searching for commercial space for rent you might be considering moving into a building with an open plan design. While this office design is great in theory you might want to rethink the type of office leasing you’re looking for – open plan offices have a few problems that may affect the workflow of your employees. 

The theory of an open plan design is sound. The lack of small, enclosed rooms (such as private offices) coupled with a wide, open layout theoretically should encourage workers and managers alike to interact with one another and prompt collaborations.

However, a fairly recent study has revealed that workers are doing the exact opposite of collaborating with one another — they’re keeping to themselves more than ever. To conduct the study, researchers used microphones and electronic badges to track email use and the level of interaction among employees.

The study revealed that employees had decreased face-to-face interactions by 73%. Instead of interacting with one another employees buried themselves in text messages and emails which both saw an increase of over 67%.

What's the Argument for Open Plan Offices?

What’s the Argument for Open Plan Offices?

The concept of open plan office spaces seems like a great idea. Studies show that our social environment contributes significantly to our ability to stay motivated and work that much harder. Furthermore, work environments today are places where “playing well with others” has become more essential than ever.

That’s why the idea of an open plan office makes complete sense. The workplaces that have higher interaction amongst employees tend to not only improve work output but also improve job satisfaction, as well.

One major influencer of employee productivity, job satisfaction, and improved willingness to collaborate with others is the design of the workplace (theoretically anyway). The entire point of the open plan office concept was to create a wide space that discourages independent work and encourages more social interaction.

The open plan office concept was all about creating a sense of community — solo work would be reduced in favor of a group based effort which would (theoretically) improve overall work output.

It turns out workers need one vital factor to concentrate – privacy

One aspect of productivity that the open plan office design didn’t take into account was the fact that employees require privacy to get work done. Imagine yourself in an open plan office — every movement, every bit of conversation, every individual — all visible to you and serving as distractions from your work.

On average it takes about 23 minutes to get back on track after you’ve been distracted. Thus, employees try to make up for these distractions by expending additional mental energy to regain their concentration. As a result, they tend to communicate even less with their coworkers, research shows.

During these periods of constant distraction workflow is interrupted, and the employee will likely perform at a lower level than average. Efficiency and productivity will decrease, and mistakes will arise.

Focus is the key word here. The failure of open plan offices lies with the fact that employees aren’t able to focus. There are just too many people doing too many things in too dense an area for anyone to truly concentrate on their work.

What the cubicle design gets right is that it allows employees to bury themselves within their own little world as they focus on their work, free of distractions. Focused work is the key to productivity. When focus is taken away so is an employee’s ability to stay truly productive.

Why aren’t employees making more of an effort to collaborate?

Whether intentional or not, open plan offices were designed to increase collaboration and interactivity at the expense of concentration and focus. The problem with this concept is that employees expend emotional and cognitive resources attempting to make up for their lack of focus. As a result, they’re not as willing to collaborate with others.

Further research indicates that the combination of lack of privacy along with increased crowding in the workplace often puts workers on the defensive and office relationships are strained as a result.

The real reason why open plan offices fail

There’s no such thing as a one-size-fits-all for office designs. As individuals, we all view workplaces differently. Where one person may find an open plan office to be the perfect environment for getting collaborative work done another person may see it to be incredibly distracting.

Concentration and focus will always be the foundation of productivity. That’s why organizations should attempt to find a workplace solution that not only allows employees to have a certain degree of privacy (which leads to increased focus) but also fosters the need for more interactions amongst employees.

If you happen to be searching for office space for rent in Clifton Park, we can accommodate you. Atrium properties has over 40 years of experience in building and managing office buildings. We always ensure our tenants are paired with the ideal commercial property for rent because we know that if our tenants are successful, we’re successful. Contact us today for more information.

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How to Calculate Commercial Rent

How to Calculate Commercial Rent

There are a variety of ways of calculating commercial office space for rent. Which calculation you use often comes down to the type of tenant business renting out the space. However other factors to take into consideration include business revenue, the state of the economy and so on.

In some cases, a tenant is allowed to pay lower lease payments during periods where they’re expected to make less revenue. This is where the demand cycle comes into play. There will be some months that do better than others due to the ebb and flow of customer demand.

It’s up to the tenant and the landlord to work out a lease agreement that will satisfy both parties.

What types of rental properties can you find?

There are many types of commercial rental properties. These include:

  • Retail space
  • Strip centers
  • Professional offices
  • Shopping malls
  • Freestanding buildings converted into office spaces

Sometimes it can be difficult to find a good commercial tenant. Businesses that have experienced success rarely change locations unless they’ve outgrown their current location. However, if a good tenant shows interest in one of your office rentals (emphasis on good tenant), you can potentially enjoy years of steady, dependable rental income.

In addition, if the space is located in an area with high foot traffic, your tenant will want to continue leasing the location for a long time. The business world is often uncertain, and there’s no guarantee that moving to a new space will allow them to experience the same level of success as they have in their current rental space.

Lease Types

There are various lease types to consider when you have commercial property for rent.In most cases, the lease type is determined by the type of tenant business moving into the office space for rent. Let’s break down each lease type, analyzing how they work and how they’re calculated.

Percentage Lease

Businesses must adhere to demand cycles, meaning they will have their good months and bad months in terms of cash flow. Factors that affect the demand cycle includesthe location of the office space for lease and the economy. If the economy isn’t doing well, for example, there’s a good likelihood that business will slow and cash flow will begin to trend downward for a time.

With these factors in mind, landlords and tenants sign a percentage lease in which the landlord determines a minimum base rent (typically an affordable amount the tenant should be able to work with despite demand cycles), and then have the tenant pay a percentage of their retail gross income along with the base rent amount.

Percentage leases benefit both the landlord and the tenant because during months where business may be slower, the tenant will be able to pay less and stay afloat. On the other hand the landlord benefits because they will receive more rent when business begins to pick up. It’s a win-win for both parties.

You can calculate a percentage lease in two ways:

  • Minimum base rent + percentage over a certain base amount

With this particular calculation, the tenant will pay an agreed-upon minimum base monthly rent, and then add together the percentage of all gross receipts over a specific base amount. Let’s look at an example.

Let’s say base rent per month is $1,200, and 3% of all gross receipts over $45,000 per month. If one month’s gross receipts come out to $80,000 we can calculate the equation in the following way:

$80,000 – $45,000 = $35,000

$35,000 x .03 = $1,050

$1,050 + base amount of $1,200 = $2,250

  • Minimum base rent + percentage of all gross receipts

This calculation is a bit different in that you don’t wait to see what your bottom line revenue is going to be for the month before you calculate the percentage. Essentially, rent will be paid on all gross receipts from zero. Let’s look at an example.

$1,000 base rent + 3% of all gross business receipts. Thus, we would take 3% of the entire $80,000 (using the previous numbers) and add that to the base rent. You can calculate that with the following equation:

$80,000 x .03 = $2,400

$2,400 + $1,000 = $3,400 monthly rent

Rent Per Square Foot

When calculating usable square feet, understand this is the actual amount of space that the tenant is occupying. Rent per square foot is often used when multiple tenants are sharing the same building. Keep in mind there will be parts of the building that both tenants will use such as lobbies, elevators, hallways, bathrooms and so on. These are called common areas.

When it comes to paying rent on the common areas, the number of square feet for these spaces (hallways, elevators, etc.) is typically divided amongst both tenants at a prorated amount. Both tenants will pay a portion of the landlord’s expenses for these shared areas.

When you’re doing a calculation for rent per square foot, rent will be set at a base amount per square foot of the commercial space. You can calculate this amount either monthly or annually.

Annual example: A 2,000 square foot office space has a rent of $12.00 per square foot.

The equation for this calculation is as follows:

2,000 x $12.00 = $24,000 Annually

You can then divide the above number by 12 months to get your monthly rent (example):

24,000 / 12= $2,000 per month

Conclusion

Commercial space rent negotiation can be complicated at times. Business tenants need to know how much they’re spending on operating costs so they know exactly how much they can spend on rent each month while still leaving room for profit. On the other hand, landlords should have their costs of ownership firmly in mind. Therefore, each party should strive to meet at a middle ground where they will both benefit and be happy with the arrangement.

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Commercial Property Classifications & Types of Office Spaces

Commercial Property Classifications & Types of Office Spaces

If you’re looking for a commercial space for rent, it can be understandably difficult to pin down the perfect location. After all, with all of the various types of commercial property classifications and types of offices for lease to choose from it can all get a little bit confusing.

Don’t worry. We’ve assembled a guide to help you differentiate the various commercial property classifications to help you stay ahead of the curve as you search for the perfect commercial property for rent.

Understanding the different classifications of office spaces  

Generally, office spaces are separated into three categories — Class A, Class B, and Class C. Each classification is usually determined by  a number of factors that include aesthetics, amenities and the age of the building. Let’s take a more in-depth look at each classification type.

Class A Office Space

Class A office space provides the best of the best when it comes to amenities and location. For example, Class A office leasing typically comes with on-site workout facilities, massive media centers, cafeterias, conference rooms and much more.

Typically, Class A buildings are either completely brand new or have been significantly improved over the past few years. It terms of positioning, Class A buildings tend to be located in busy locations such as major roads, the center of business districts and anywhere else that’s generally busy with pedestrian traffic. An example of a Class A building would be a skyscraper located in the downtown area of a major city.

The amenities and prime location of Class A buildings come at a price, however. Rent is astronomical, but of course, if you’re leasing a Class A space, your business likely makes enough to easily cover the expense.

Class B Office Space

Class B Office Space

Class B office rentals are also excellent locations for respectable businesses to set up shop, but they aren’t quite as nice as Class A buildings. Class B office buildings are great alternatives for businesses who desire a high-quality building without having to pay the high cost of leasing a Class A building.

Sometimes, Class B buildings can be found in decent locations such as major commercial areas. However, you’ll often find a vast majority of Class B office spaces in the suburbs. Interestingly enough, a good number of Class B buildings were once classified as Class A, but due to age and deterioration, they have been downgraded to Class B.

Class B amenities can be just as good as their Class A counterparts though they tend to offer less benefits overall. With the right upgrades and renovations (along with an increase  in amenities), a Class B building can eventually be bumped up to a Class A.

When it comes to rent, Class B office spaces are considered to be average for their respective markets. As stated before, Class B buildings are excellent choices for businesses who want a quality building without paying the high rent costs of a Class A building.

Class C Office Space

As you’ve likely guessed, Class C buildings offer far less than Class A and Class B buildings. They’re usually much older than their nicer counterparts and don’t provide as many amenities. When it comes to location, they tend to be located in undesirable environments.

Class C properties may not be attractive to larger businesses, but they’re perfect for startups who are operating on a shoestring budget. Class C office spaces give smaller start-up businesses an opportunity to spend most of their money on more important areas of their business such as growth. In the meantime, they’ll still have a building to operate out of until they can afford something nicer.

Types of Office space

Classifications rely largely upon the quality of the building. However, office spaces can further be broken down into various types.

Traditional Office Space

This is your most common type of office space. Most people are familiar with traditional office spaces because  they’ve either worked in one or have seen it on television shows and movies.

All traditional office spaces usually have the same layout — cubicles, conference rooms, a reception area, private offices, break rooms, and a mailroom.

Creative Office Space

This is the type of office space that’s very open in design. You won’t find any cubicles in this type of environment, and there’s a chance you won’t find many private offices either. 

You’ll often find floors that aren’t carpeted, and the ceiling has an “open” design where the ductwork is exposed. Creative office spaces have all sorts of collaborative spaces such as group workstations and conference rooms.

It’s not entirely uncommon to find amenities to make employees as comfortable as possible. These includes game rooms, break rooms, a large kitchen, lounge areas and more.

The purpose of creative office spaces, as the name implies, is to help employees feel more creative as they go about their daily jobs. You can find creative office spaces in all three classifications of office buildings, and they’re popular amongst both small and large businesses. In fact, even major corporations have renovated entire floors of their Class A office buildings into creative office spaces.

Co-Working Space

With so many people turning to self-employment, co-working spaces are becoming more and more popular amongst freelancers and startups.

Essentially, co-working spaces house several entrepreneurs who rent a single small space for themselves. Co-working spaces often have open areas where tenants can gather together to interact and bounce ideas off one another. This is the perfect arrangement for those who don’t have a significant budget dedicated for monthly rent.

Co-working spaces come with a variety of benefits. For one they save the tenant thousands of dollars in rent. Some co-working spaces are flexible enough to offer week to week renting or even day to day. The most common arrangement is month to month in which the tenant can walk away at the end of the month if they so desire.

Co-working spaces are also all inclusive which means all expenses including utilities, common area maintenance (CAMS)  expenses and insurance  are covered. This gives tenants the freedom to operate without having to worry about the various expenses that normally come with operating a business out of a office space for rent.

Other office space types

Another type of office space that has yet to be mentioned are flex spaces. Flex spaces are ideal for those who require the entirety of their business, both the front end and the back end, under one roof. For example, a tenant will have their warehouse, accounting department, reception area and call center all in the same building.

Finally, there are executive suites which operate much the same as co-working spaces except they’re more professional. Office suites are ideal for remote sales teams and other smaller businesses who wish to benefit from a more professional setting while still keeping monthly rent relatively low.

Finding the right type of commercial space for your business

Understanding the various types of commercial property classifications and types of offices for rent will allow you to plan out which space is right for your business. If you’re looking for commercial space in the Albany, NY area, then look no further than Atrium Properties. We can help you find the perfect building for your business so that you can get up and running. Contact us today to get started.

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Ten Questions To Ask Before You Sign A Lease

Ten Questions To Ask Before You Sign A Lease

If there’s one thing you take away from this article it’s this — never take a lease for granted. The terms may seem friendly and accommodating up front, but even one misread sentence could lead to years of aggravation and headaches. Signing a lease can be one of the most significant contracts a small business owner ever signs. That means you should approach every lease with care. If not, you might end up regretting having signed that dotted line.

Let’s take a look at ten questions you should ask before you sign a lease.

1) How much is the rent?

When leasing office space, rent is just another part of doing business. But even looking for the cheapest rent that you can possibly find can be challenging.

Generally speaking, rent for commercial spaces is determined by the annual cost per square foot of the space. However, there are around five ways to calculate rent that all use square footage as a basis for comparison.

Gross leases

With a gross lease, the tenant is required to pay a flat monthly amount. Landlords are responsible for insurance, repairs, taxes, and any other expenses that come with operating out of the building.

Net leases

This is an agreement that requires tenants to pay for some or all of the taxes on a property, in addition to rent.

Net-Net leases

On top of paying taxes and rent, the tenant will also be responsible for paying insurance.

Net-Net-Net or Triple Tet leases

These types of leases are usually written for industrial properties. The tenant is not responsible for any of the costs associated with operating out of the building. This includes maintenance and repairs.

Percentage leases

This is a special type of rental where tenants pay a fixed rate plus a percentage of gross income. Percentage leases apply to retailers, with an emphasis on shopping centers and malls.

Can you sublease?

2) Can you sublease?

Let’s say you move into an office space for rent that’s ideally suited for your business. However, a few years into the lease you’ve grown to twice your size and your current facilities are no longer adequate. You can’t leave without breaking your lease, so what do you do? Simply put, you can find a tenant who meets the same standards that the landlord comes to expect from all of his or her other tenants.

Thus, subleasing occurs when the tenant rents to a subtenant. As mentioned before, the new tenant must meet the standards of the landlord. Therefore, you must vet the tenant to ensure they meet those standards.  Furthermore, if your subtenant decides not to pay, you’re still bound by the original lease to pay the rent.

Read the language of your lease carefully. Sometimes the new tenant will pay more than you did for the rent. The question of who gets the extra money might become an issue if you’re not careful. Be upfront with your subleasing privileges from the beginning to avoid issues like this.

3) Who else can move in?

It would be a real pain if a manufacturing plant moved directly next door to your law firm. It would be even worse if a competitor moved in. What would happen if your neighbor brought in the wrong type of crowd — the kind that scared away your customers.

Zoning laws may be more of a blessing than many of us realize. They protect businesses from moving next door to an incompatible neighbor. If you feel your landlord’s limits aren’t stringent enough regarding who can move in next door to you, then you can negotiate for stricter qualifications. However, this may come at a price. The stricter your limits, the harder it will be to find a new tenant if you decide to sublease.

4) What building service do you get?

Before signing a lease for a commercial space for rent, you should identify what services you’re entitled to. For example, every business needs electricity to operate. You also need running water for bathrooms. Let’s look at a couple of points you need to keep in mind:

  • The cleanliness of your business is essential for public perception. Therefore, you should request that cleaning services be included as part of the lease. Part of this negotiation should include the frequency at which the building is cleaned and whose responsible for the nuances of house-keeping, such as vacuuming, cleaning the bathrooms and taking out the trash.
  • In most cases electricity will be covered by the landlord. However, many landlords set reasonable limits on how much electricity you can use. If you exceed that limit, you may have to pay the difference.
  • Heating, ventilation, and air conditioning (HVAC) is also typically covered by the landlord. Regardless, you may still have to do a bit of negotiating

5) Can you renew?

When your lease has expired you have two options: move out or renew. Legally speaking, your landlord doesn’t have to offer you the same space once your lease has expired. That’s why it’s important to negotiate this part of the lease early. You should have a clause that guarantees that you have first rights when your lease has run its course. If not, you’ll have to pay the prevailing market rate to keep the space.

To renew their lease, a tenant typically has to give written notice. A tenant should submit this notice about one year before the expiration of the lease for long-term leases. Short-term leases are around three or four months.

If you don’t want to worry about letting your lease run out accidentally, you can set to renew automatically until you take measures to cancel that arrangement. Automatic renewals are especially beneficial to businesses with multiple branches where it can be challenging to keep track of all of the renewal dates of the separate locations.

6) Who’s responsible for insurance?

As leases are finalized, and tenants prepare to move in, insurance is often overlooked. As a result, the commercial property for rent  will likely be covered by a variety of insurance agencies that overlap one another.  Therefore, the price is more expensive than it has to be. Furthermore, the landlord will run into all sorts of trouble if catastrophe were to strike.

For example, let’s say a fire rips through the office space for lease. It may take several years for the various  insurance agencies to sort out who pays what or what’s covered vs. what isn’t covered.

Generally, landlords have a comprehensive policy on the building to cover liability for common areas such as elevators, stairways, lobbies, bathrooms, etc. They also provide casualty protection for the building itself.

With that being said, landlords are well within their rights to insist that the tenant maintain their own insurance to provide protection from being sued by a customer who may injure themselves due to the conduct of the business.

7) How long will the lease run?

Generally speaking, commercial leases can run anywhere from 3 to 10 years, and you can negotiate the terms with the landlord. Not only should you determine when the lease should begin but also when it ends. Last minute problems tend to pop up if you haven’t verified if the property is ready for you to move in yet.

For example, construction on the building may be taking longer than intended, or you may disagree with the landlord about making your own renovations. You may even run into a situation where the old tenant refuses to move out!

With that being said, your lease should tell you what will happen if your rental space isn’t ready to be occupied by the move in date. It should also spell out how the landlord will accommodate your inconvenience. Be careful about moving out of your old premises too early. If you happen to move out of your old space and your new office space isn’t ready for you to move in yet, you might end up in a situation where you have to operate out of your van until you can figure things out.

8) How much will the rent go up?

Today, costs can be wildly unpredictable; so much so that many landlords insert escalation clauses in their leases to protect themselves. There are many common types of escalation clauses. One type of escalation clause passes on prorated increases in taxes, maintenance, heat, and other direct costs. Other clauses build in regular step-ups in rent over the life of the lease while others raise rent according to the Consumer Price Index.

9) Who pays for improvements

Most modern-day office buildings allow for renovations to be made such as lighting, carpeting, paint, and so on. However, these types of improvements are contingent on what the tenant feels they need to improveand what the landlord will allow. Frankly, improvements are often the most negotiated aspect of any lease. Many tenants and landlords have battled over the issue of improvements to a leased property.

The point of contention typically revolves around the high cost of improvements. For example, even minor renovations such as installing a single new electrical outlet can cost as much as $100 to install.. The cost would be much higher if every outlet in the building needed to be replaced.

Heavy duty carpeting can be even more costly, running as much as $20 per yard. That certainly adds up if you’re trying to carpet an entire building. If you’re looking to hire carpenters, painters, or any other tradesmen they can charge as much as $15 – $30 an hour for their services. Overall, the costs add up quickly.

The best way to convince a landlord to foot the bill for significant improvements to the property is to convince them the renovations will attract future clients even after your lease has run its course. Expect strange requests, such as an unusual paint color and carpeting with weird patterns to be rejected. Such renovations add no value to the property, but this, of course, is dependent on what the landlord allows.

All agreements pertaining to improvements should be put down in writing. Ideally, you should also include an estimate of costs from a contractor and detail floor plans before signing the lease. This document is called a “work letter,” and it also states who owns the improvements made to the property.

For example, improvements such as shelves, office desks, cabinets and the like will typically belong to the landlord regardless of who pays for it. That’s why specifying who owns the improvements is very important.

10) What happens if your landlord goes broke?

This is a worst-case scenario, but it certainly happens from time to time. Let’s say you’ve spent thousands of dollars on renovations to a new office space. All is well for the first few months, but suddenly a representative from the bank shows up and tells you that your five-year lease is void because the bank has foreclosed on the building. They give you the option of staying, but atthree times your original rent. Otherwise, you have thirty days to move out.

This kind of stuff happens, so you need to protect yourself the best way you can. You can avoid such a situation with a standard “recognition” or non-disturbance clause. This ensures that the rental agreement between the tenant and the landlord will continue under any circumstances. Non-disturbance clauses were created to protect the client on the chance that the landlord goes bankrupt.

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How to Lease Commercial Real Estate

How to Lease Commercial Real Estate

As a business, you should know the ins and outs in order to lease commercial real estate. Knowing how to negotiate effectively with a landlord will help you avoid getting ripped off and will also aid you during the negotiation process.

There are three forms of commercial leases:

  • Full-service leases
  • Net leases
  • Modified gross leases

In this article, we’ll be breaking down the steps of finding, negotiating, and signing a commercial lease as you search for commercial space for rent.

1) Setting your property parameters

Before you start signing contracts, you should have a general idea of your ideal property parameters. There is a massive range of commercial property for rent out there, thus setting predefined parameters will help you significantly limit your search.

You should have an idea of your ideal building size, ideal customer, accessibility, budget, and property type/zoning. Setting and understanding these parameters will ensure you find commercial real estate that’s perfect for your needs.

Now we’ll exam each of these parameters in-depth to gain a better understanding of each.

Ideal Customer

No matter what type of business you’re running, one of the most important parameters you should focus on is your ideal customer. Examples of businesses that fall into this category are restaurants and retail stores. Identifying where your ideal customers congregate will help you pick the perfect location to set up shop. 

Let’s say you run a tire business. Setting up along a major road will put you in the optimal position to become more visible to drivers who are in need of a tire change.

When it comes to office leasing, you should search for a location that’s more suitable for your employees. How easy is the location to find? Is there accessible parking? Etc.

Property type/Zoning

When you’re on the hunt for office space for rent be mindful of zoning laws. All commercial real estate has been zoned for a specific use. For example, certain commercial buildings have been zoned for retail stores while others have been zoned for use by restaurants.

Therefore, if you’re attempting to open a warehouse, you won’t be able to lease a commercial space zoned for a grocery store. It would behoove you to know the type of zoning your business needs. Conduct thorough research on your local zoning laws to stay ahead of the curve.

Size

Buildings come in all shapes, sizes, and layouts. The best way to go about determining the size of your desired office space for lease is to calculate either the total number of people you plan to employ or the maximum number of customers that you can accommodate at any given time. 

Max Budget

Always be aware of your maximum budget. Recognizing your limitations will allow you to avoid wasting your time searching for offices for rent that don’t fall within your budget. Typically, your maximum budget is determined by the size of your business as well as its performance.

Accessibility

Easy accessibility is essential for every business. Let’s say you run a restaurant. Do you have adequate seating for your customers? Do you have sufficient parking? Do you have a ramp for disabled individuals? Are you located in an area with ample vehicle and foot traffic? Answering these questions will give you a general idea of how truly accessible your commercial space is.

The various types of commercial leases

2) The various types of commercial leases

There are three types of commercial leases you should familiarize yourself with:

  • Full-service lease
  • Net lease
  • Modified gross lease
Full-service lease

When it comes offices for lease, the most common type of commercial lease is a full-service lease. With a full-service lease, the rent is all-inclusive. This means the landlord takes care of all property related expenses. Such expenses include insurance, repairs, utilities, janitorial services, and property taxes.

Full-service leases are easily the best deal for the tenant because all costs are upfront. Therefore the tenant can forecast monthly expenses without the fear of hidden fees upsetting their budget.

Net lease

With a net lease agreement, the tenant pays a lower annual rent when compared with a full-service lease. As a result, the landlord can also charge what are considered to be “usual costs.” These include common area maintenance items (CAMS), property insurance, and property taxes.

There are three types of net leases: single, double, or triple net lease.

With a single net lease, the tenant pays a pro-rata share of the building’s property taxes on top of the rent. With a double net lease, the tenant must add on property insurance in addition to the property taxes and rent. With a triple net lease, the most landlord-friendly lease, the tenant must pay property insurance, property taxes, and CAMS.

The primary advantage of a net lease is the fact that the rent is cheaper overall. However, the tenant takes on the responsibility of covering the maintenance fees of the property. In most cases, these fees will be added to the rent on a monthly basis.

Modified gross lease

If you’re not interested in either a full-service lease or a net lease, you can meet in the middle with a modified gross lease.  With a modified gross lease, tenants pay for CAMS, property insurance and property taxes. What makes the modified gross lease so unique is these expenses are paid along with the rent in one lump sum. 

The primary advantage of a modified gross lease is that the price is fixed and you won’t have to contend with any hidden fees. Even if certain expenses increase (such as CAMS or insurance), your rent will always remain the same. Also, when you sign a modified gross lease, the landlord covers the janitorial and utility costs.

3) Find the right type of commercial property

 There are a variety of factors you need to keep in mind when you’re searching for the right type of commercial property.

Anchor tenants  – sometimes commercial properties that have multiple units will have an anchor tenant. The perfect example of an anchor tenant would be a dental office located within a shopping complex. Find out about any possible anchor tenants before signing a lease, because the landlord might be able to back out from the other leases associated with the property if the anchor tenant leaves.

Location – ensure you’re in a commercial space that either accommodates your employees or your customers.

History of the landlord – knowing the history of your landlord will give you an idea of what to expect during your interactions with one another. Often times commercial space lease agreements span multiple years, so it’s best to know as much about the landlord as possible.

Amenities and services – what type of amenities and services does the commercial space offer? Examples include utilities, dining options, Wi-Fi, loading bays, outdoor space, etc.

Doing a walkthrough of the commercial space

When you’re searching for a commercial space, you should always look for multiple locations. That way, you’ll have more options when you enter the negotiation phase. On average, you should identify at least 4 -10 commercial spaces. This will give you a ratio of the average price that you should come to expect of the commercial real estate in a specific area.

A great idea is to identify around 8 – 10 commercial spaces that fit your criteria and then limit that number down to 4 -5 picks. Once you’ve done that you should do a physical walkthrough of those locations to narrow your choices even further.

In the commercial real estate business, physical tours of a property are customarily referred to as “technical property reviews.” It’s highly recommended that you walk the property with an experienced contractor because the property may need what’s known as a lease buildout –improvements and additions that are required to be added to the commercial space.

Lease buildouts can be essential to the negotiation process because you may be able to get the landlord to either fully or partially cover the expense of any repairs or additions. It all comes down to negotiating the lease buildout into your lease once you’ve entered the negotiation phase.

Of course, that leads us into one of the most critical aspects of this guide — negotiating the terms of your commercial lease.

4) Negotiate the terms of your commercial lease

When you have located the commercial space that fits your criteria, it’s now time to move on to the negotiation phase. Formally, you should request the terms of the lease in writing. This information will be communicated to the broker of the landlord.

Next will come your business letter of intent (LOI) which states your offer or counteroffer. You can use your LOI to communicate to the landlord why you’re the best choice for a particular piece of property. You should make your LOI as convincing as possible because it’ll make you more attractive to the landlord, especially when you’re competing for a commercial property that’s especially competitive.

This is what your letter of intent should include:

  • The number of years you’ve been in business
  • A statement with your intent to lease
  • The terms you wish to propose
  • A list of your products and services
  • Your pricing
  • A description of your business
Common commercial lease terms you’ll encounter

We’ve discussed the various types of leases, but no matter what lease you end up signing, you’ll run into a number of similar terms. Let’s take a look at a few of the more common terms:

  • Rent abatement – the tenant will either not have to pay rent or pay a reduced price if there is any damage to the commercial property until the damage has been fixed.
  • Length of lease – on average a commercial lease can range anywhere from 3 to 10 years. Businesses will often find shorter leases are advantageous because it lessens future financial burdens which allows for great flexibility.
  • Capital expenditures – this term makes reference to the party who’s responsible for specific expenses such as maintenance and repairs amongst other costs associated with the building.
  • Lease build-out credits – a representation of the tenant’s ability to conduct leasehold improvements in their rental property which will then be charged to the landlord. The only improvements that fall under this category are the ones that are required for the business to operate successfully. To cover the cost, the landlord will either pay out of pocket, reduce the rent, or reimburse the tenant.
  • Deposit – the vast majority of leases require a deposit. Deposits are typically fully refundable and serve to protect the landlord from a tenant who does not pay their rent or from those who cause significant damage to the commercial space.
  • Termination clause – this is a clause in the lease that allows either the tenant or the landlord to terminate the lease under specific conditions. Termination clauses are both good and bad because they allow the tenant to terminate a lease when needed, but the landlord can easily do the same.
  • Use clause – this is a clause that defines the type of business that can use a particular commercial space. For example, you can only open a restaurant in a space that has been zoned for restaurants.

There are many terms for commercial leases. Do your homework and know what terms are available to you so that you can identify all of your options.  

What it all comes down to

When it comes to leasing a commercial space, there are a great many factors you have to keep in mind. Ultimately, commercial leases can work to your advantage if you know what factors to look for. Do your homework. The more prepared you are, the more likely you’ll end up with a good deal that will benefit your business for the long-term.

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5 Mistakes Small businesses make when leasing office space

X Mistakes Small businesses make when leasing office space

It can be exciting when you’re on the hunt for new office space. However, jumping in without a plan is often fraught with danger. In fact, it’s all too common for small businesses to make mistakes while leasing office space.

Owners get overly excited and make crucial mistakes that can prove costly for the business. Some errors could even slow the growth of the company itself. Often, rent is the second highest expense that businesses have to deal with. Therefore, doing things right the first time can potentially save you untold amounts of money down the line. 

Let’s look at 5 mistakes that small businesses make when leasing office space so that you can learn what not to do the next time you find yourself in the market.

1) Procrastinate

We’re all familiar with procrastination. It’s that thing we do when we put off important work. Procrastinators often have the “I’ll just do it tomorrow” attitude. The problem with that type of thinking is that tomorrow typically never comes until it’s too late.

Procrastination can be the kiss of death for a small business owners hunting for office spaces. Generally, you should begin searching for an office space at least six months in advance before moving out of your current space. Looking this far in advance gives you time to check out prices, the surrounding area, and just get a general feel for how the market is.

Searching last minute may put you in a position where you might have to settle. Whether you’re settling with a building that’s too small, too big, disagreeable rent, a bad area or any number of factors, you will always be at a disadvantage. So do yourself a favor and search early. You may potentially save yourself thousands of dollars. 

2) Relying on just listings

Most of the time, Google is your best friend. In this instance, it might just work against you. The temptation to find office listings through a Google search can be tantalizing, and while it can give you a general snapshot of the market in a particular area, you might just be led astray if you’re not careful.

Sometimes, online listings can be inaccurate. Plus, it’s in the landlord’s best interest to get a business owner down to the property as fast as they can where they’ll have a leasing agent ready to make the big sale.

Oh, and the sale has to happen today, or the “exclusive” deal will go away. This puts pressure on the business owner which may cause them to make a purchase without truly understanding what they’re getting in to.

3) Doing everything alone

You’re a business owner; therefore you have a good sense of how to negotiate fair deals and whatnot. Right? That type of thinking can leave a business owner with a potentially bad buy. Leases can be very complex in the way they’re worded, and they can often change depending on the type and size of the space. Also, it’s generally advised that you should never sign a lease for a space larger than 2000 square feet without a trained professional at your side, poring over each line of the contract with you.

There are just too many variables to a tenant lease for someone who isn’t trained to try to go it alone. Bring a good tenant broker with you. There can be hundreds if not thousands of small variables that may fly under your radar. However, a trained tenant broker might be able to catch most of the things that you miss. 

Tenant brokers represent your best interests. The best trained tenant brokers will take care of all of the legal complexities that go with signing a contract and will get you the best deals with the fairest lease terms.

With all of the hidden information that can be found in leases, you should never take a chance. Often, a tenant broker can save their client up to 25% of the total value of the lease.

4) Going in with no research

Sadly, many business owners take a chance and go in blind and end up getting burned on certain aspects of the contract (such as rent). If they had just done even a small bit of research, they might have been able to negotiate a better deal.

 All business owners should have a general understanding of how they should go about leasing a commercial space before they even start looking. They don’t have to be experts, but they should know just enough to be dangerous. Going into a deal with as much knowledge as you can is a good way not to get ripped off.

Understand your advantages, identify pitfalls and recognize your rights as a tenant before getting into a contract. Signing the dotted line on a lease you don’t understand could have disastrous consequences for any small business.

5) Acting on an impulse

Remember, renting an office space is a major decision for a small business. Not only does it take a toll on finances, but it can also affect factors such as growth. Thus, detaching yourself from your emotions is vital to help you make the most informed decision that you can possibly make.

Spend more than a few hours during the research phase. Put in your due diligence and find out as much as you can. Take into account the things that matter most:

Can you afford the rent? Do you plan on growing? How much space do you need? Do you need a parking lot? Etc.

Lastly, do your best not to be seduced by a real estate agent because it’s their job to close you right then and there. Leave the emotions at the door.

Avoid these mistakes

One of the most significant investments that a small business can make is leasing office space. Performing your due diligence will make you an informed consumer which will allow you to understand all of your options. Furthermore, there’s no shame in bringing a professional with you if you’re not sure how the process entirely works. There’s too much at stake to make dire mistakes. Get it right the first time so that you won’t regret it later on down the line.

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10 Surprising Things available for Lease

10 Surprising Things available for Lease

Typically when people think of leasing something, the first thing that usually comes to mind is renting out a room in a home. However, you may be surprised to learn the sheer number of things available for lease. Some are more surprising than others, but here are 10 things available to lease.

1) Caskets

Funerals can be costly. It turns out that the most expensive part of a funeral is the casket. Your average casket will cost the bereaved family around $2,000. Some Caskets can cost as much as $10,000! To save on funeral expenses, you can rent a decorative casket for the funeral service. Some rentals can cost as little as $1,000. When it comes time for the burial, the family can bury their loved one in a simple, yet less expensive casket.

2) Chickens

If you’ve ever wondered what it would be like to own a flock of chickens, you’re in luck. Companies like Rent the Chicken will rent chickens, a coop, and all of the food and supplies you’ll need to take care of your new flock. Renting a chicken may be a great route to go if you’re unsure about whether or not you’re ready for the hardships of owning your own chicken. If you decide you love your new chicken, you can adopt it into your family! If owning a chicken isn’t quite for you, you can return it at the end of the rental period.

3) Goats

After seeing chickens on this list, you shouldn’t be too surprised that you can also lease goats as well. Goats are fantastic at keeping the lawn nice and short, and they get rid of nasty weeds that may pop up in your yard. Goats are known for their ability to eat practically anything, so make sure you keep them away from your garden. A simple online search will reveal to you whether or not there are goats available for you to rent in your area.

4) Fancy clothes

If you’ve been invited to a fancy affair but don’t quite have the wardrobe to attend, you can lease out fancy outfits at sites such as Style Lend and Rent the Runway. You can rent designer clothes for far cheaper than retail price and look great for your fancy party.  Custom plans allow you to choose the length of time that you need your new outfit. If you’re especially strapped for cash, there are plenty of choices that won’t cost you any more than $50!

5) Your Neighbor’s Garage

When you have gotten to the point that you’ve run out of space in your home to store your personal possessions then it’s about time that you considered storing your items elsewhere. Storage rentals can get a little bit expensive, however, so why not rent out your neighbor’s garage? If your neighbor has extra space in their home, garage, basement, attic, etc. then sites like Store at My House will allow them to list the extra space on their property. Renting space with your neighbor should save you money and keep your items close at hand without jumping through the hoops of a storage unit contract.

6) Wedding Cake

Weddings are already expensive. Add in an extravagant wedding cake that could potentially cost into the thousands, and there’s a possibility you won’t have any money left over for the honeymoon. If you’re on a budget, renting a fake wedding cake is always a viable option. Companies like cakerental.com are masters at replicating Styrofoam cakes that look like the real thing. They can even insert a real slice of cake for the “first bite”. Afterwards, you can wheel the cake away, and you can serve your guests something on the cheaper side (like sheet cake). You’ll get your pictures and your guests still get to eat cake. Everyone wins!

7) Tires

There’s nothing more dangerous than tires that have been stripped of their threading. It’s one thing to drive around the corner to the supermarket (though even that is dangerous on balding tires), but if you need to go on a road trip or drive further out and you can’t quite afford brand new tires, you could always rent tires. Renting tires every day will begin to add up when it comes to the rental fees, so you’ll want to buy new tires eventually. However, tires is a fantastic short term solution so that you’re safe on the roads until you implement a long-term solution.

8) Solar Panels

Perhaps you’re ready to change the energy source that powers the items in your home but can’t afford the expense of installing solar panels. If that’s the case, you can lease solar panels from companies that will deliver and install the proper equipment either for free or for a small fee. You can either pay a monthly fee and keep all of the power that you generate, or you can sign a power purchase agreement and buy only the power that you need. Both options are typically cheaper than the rates offered by utility companies.

9) Luggage

Luggage is one of those things that you only need for a select few occasions: moving, traveling, etc. Unless you often travel your luggage goes largely unused for most of the year. So why own when you can rent? Save room in your garage by going to sites like RentLuggage.com and pick out the luggage that you specifically need for your trip. Whether you need travel bags, suitcases, or even bags to move sports equipment, you should be able to find a suitable rental to handle all of your needs.

10) Office Space

Well, this one may not be so surprising, but if you find yourself in a situation where you need a workspace, but your current work/home environment isn’t cutting it, you should think about leasing an office space. Finding an office space for lease will allow you to conduct business in a professional environment. An office space is a perfect place to get more work done and provides a physical location for your clients to sit down and speak with you about your services.

 

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How to Rent Commercial Space: The Ultimate Guide

How to Rent Commercial Space: The Ultimate Guide

Finding a commercial space for rent can be a time consuming and arduous process. When negotiating a commercial real estate lease, you’re initiating a rental agreement that allows for a business (yourself or someone who represents your interests) to rent commercial space from a landlord (such as an office building). Generally speaking, commercial leases come in three forms: modified gross leases, full-service leases, and net leases. If you’re ill-advised or simply don’t know what you’re doing, you will be at a severe disadvantage when searching for a commercial space with decent rent. This guide is designed to help you navigate through this process.

1) Set your commercial real estate parameters

As you begin your search, the very first thing you’ll want to do is set your property parameters. This is because of the wide variety of commercial propertiesavailable for all of the different types of businesses. With such parameters in place, you’ll be aided as you search for a commercial property to rent that suits your specific needs. Ideally, you’ll want to have a clear understanding of the following factors:

  • Accessibility
  • Desired size
  • Maximum budget
  • Property type and zoning
  • Ideal customer (or employee pool)

With a clear understanding of these specific elements, you will be well prepared to rent a commercial property.

2) Understand the different types of commercial leases

As already mentioned, there are three types of commercial leases. The only discernible difference between each type of lease is how costs and fees are evaluated.

Full-Service Lease

If you’re searching for an office building for rent, you’ll likely be signing a full-service lease. Full-service leases have a number of benefits. One of which is the benefit of all-inclusive rent. That means that the landlord is solely responsible for paying all expenses associated with the property. This includes maintenance and repairs, utilities, janitorial services, insurance, and taxes. If you’re a tenant, this is the best type of lease that you can get. You don’t have to worry about hidden fees, and it’s quite simple for businesses to predict their annual expenses. If you’re interested in office leasing, this may be the lease for you.

Net Lease

When a tenant engages in a net lease, the landlord will charge a lower annual rent (especially when compared to a full-service lease). In this case, the landlord can also add on other costs such as property insurance, property taxes, and common area maintenance items (CAMS).

Modified Gross Lease

If the full-service lease or the net lease doesn’t quite work for you, the modified gross lease serves as a compromise between the two. With the modified gross lease, the tenant may agree to pay a portion of the property insurance, property tax, and CAMS. However, the payment is taken as a lump sum along with the rent.

3) Identify the right commercial property

As you’re searching through the various property listings that you’re interested in, keep these factors in mind:

  • Anchor tenants – anchor tenants are typically associated with multi-unit commercial properties. The best example of an anchor tenant would be businesses anchored to shopping centers and malls. If you find yourself in such a situation, do your research. Your landlord might be able to back out legally of the property’s other leases if one of the anchor tenants leave.
  • Location – when choosing your commercial property it’s all about location. Make sure that your property is located near your ideal customer base and/or workforce. You’ll also want to consider other factors such as foot traffic and vehicle traffic as well as adequate parking.
  • History of the landlord – this is an important one because commercial leases tend to run for more than one year. If you’re going to sign a multi-year contract, you’ll want to know of the history of your landlord. Sites like ReviewMyLandlord should help you gain a better understanding of who your landlord will be.
  • Amenities and services – before you sign any contract, you should learn about all of the amenities and services offered by the office space that you seek. Amenities and services can include free WiFi, communal rooms, dining options, sewage and utilities, on-site security, and much more.

4) Negotiate commercial lease terms

The first part of the process is researching your commercial space of interest. Let’s say you find an office space for rent that you happen to like; the next part is making a choice and negotiating a lease. When entering into the negotiation process, you should begin things by requesting all terms in writing. You should especially do this if the commercial space is in high demand.

When drafting your letter of intent, include these elements:

  • Your proposed terms
  • A description of your business
  • Statement of your intent to lease
  • A list of products and services (including pricing)
  • Number of years you’ve been in business

When setting your terms, they can either be the same that was offered by the landlord’s broker or a counter-offer proposed by you or your broker. Terms will include the type of lease, the rental price, and more. Understand that you can counter any lease term at any time.

5) Commercial real estate: leasing vs. buying

After examining your desired number of commercial spaces, you’ll wonder whether you should rent or buy. Depending on the situation it may be more advantageous to find an office space for lease as opposed to one that’s for sale. However, the same concept works in reverse. Each situation is unique. Here are a few specific benefits of buying over leasing a commercial real estate property:

  • Depreciate the building – the annual depreciation of the building can be claimed on your tax returns.
  • Increase cash flow – in most cases, commercial spaces require the owner to occupy at least 51% of the building. The remaining space can be rented out, and the owner can receive the rental income.
  • Build equity – you can use this equity as collateral for additional expansions.

There are also benefits to leasing a commercial property as well. For one, tenants are able to avoid down payments. In place of a down payment, leasers pay a refundable deposit equal to 3-6 months’ rent. Furthermore, lease payments can be deducted, thus reducing the tax burden on a business. If you’re interested in these particular benefits, finding offices for lease may be your best option.

Conclusion

Ultimately, commercial real estate leases are a long-term rental agreement that exists between a landlord and a business. As you search for various commercial spaces, such as office rentals, you should always do your homework. Understand the differences between the various lease types (full service lease, net lease, and modified gross lease). Set your property parameters and once you settle upon a property, attempt to negotiate favorable lease terms. Renting a commercial space can be a difficult process, but with the right amount of research you will be prepared to face any situation that may arise.

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