​​Karen Summers Realtor
​​​                             When Results Matter
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​Karen@summerscre.com​​

The Colony Homes Specialist​

CONSIDERATIONS WHEN LEASING OFFICE SPACE

CONSIDERATIONS WHEN LEASING OFFICE SPACE



Whether you have 10 or 100 employees, as a business owner you know that finding the right space for your company is crucial for its continued success. There are many types of commercial spaces that you can rent and many things to consider before signing a lease.  

The type of space you rent can affect the type of lease and the price per square foot.  The wrong location can hurt your business, while the right type of space and location can help your business to grow.

Should you rent space in a business park, industrial park, or retail location?  Different types of commercial real estate property have varied pros and cons.  Knowing how to determine what type of space makes the most sense for your business is important.

Some Examples

If you are an innovative software developer, your office most likely should be a mix of glass, acrylic, metal and modernism.  Dark wood, shag carpeting or tired floor plans are not what you are looking for.  Work with an expert office space leasing agent who can help you find a space that represents your brand.  

Try to negotiate a generous build-out allowance.  When the space needs a few tweaks and some larger changes to take on the flexible workplace characteristics you envision, find out if your property owner will foot the bill or at least let you amortize the cost as additional rent.  Using a build-out allowance saves you money.  Negotiating the right amount calls for business savvy and a good understanding of what competing property managers offer.

Medical office space users and physician practices don't typically relocate to new buildings as often as general office tenants.  However, the competition for new patients is increasingly steering physician practices to non-hospital campus properties as they seek more conveniently accessible locations for their patient base.  

General Guidelines

Before looking at business space make a checklist that details and ranks your needs and priorities. It is easy to get excited about how a space looks and overlook drawbacks. An experienced landlord or realtor will pick up on your enthusiasm for a particular space and may hard-sell you to make a quick decision, or be less flexible in negotiating lease terms.

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Commercial Lease
In order to lease an office or commercial space, you will need to sign a commercial lease with a landlord. Unlike residential leases, a commercial landlord and tenant have the flexibility to structure their lease as they see fit.  This flexibility may introduce risks for a tenant. As a result, it is important for commercial tenants to effectively negotiate and thoroughly understand their lease.

Searching for space isn’t just about touring several offices and picking the one that looks the best for the price.  A prospective tenant should ask several questions while looking at potential spaces:

  • What are the building hours?
  • When was the building constructed?
  • Do individual suites have their own conference areas, or are there shared facilities for all tenants to use?
  • Is on-site parking available?  Is it reserved or open?  How much does it cost?
  • How is the air conditioning controlled?
  • What are the current year’s estimated operating expenses, and how are they passed on to each tenant?
  • Is there an option to expand into more space in the middle of the lease term?
  • How are maintenance issues handled, and who has the maintenance contact? Is maintenance located on-site?
  • When and where is rent paid each month?  Do you charge a late fee?

Here are nine words or phrases that are common in commercial real estate leases that you should be familiar with:

  • Rent – Often includes base rent, “additional” rent (which may include some or all of the cost of utilities, maintenance and repairs, and property taxes for the premises), and rent escalation
  • Security Deposit – Covers various potential costs of the landlord
  • Payment Terms – Often includes interest due on late payments
  • Term & Termination – May include a fee for early termination or the right to terminate upon major damage to the premises
  • Renewal Option – May grant the tenant the option to renew the lease
  • Tenant Improvements – Allocates the cost of preparing the premises for tenant’s use
  • Maintenance & Repairs – Allocates maintenance and repair obligations
  • Alterations – Details the tenant’s right, if any, to make future alterations to the premises
  • Use of Premises – May outline permitted uses, including hours of operation
  • Common Areas – Details the use and maintenance of building common areas
  • Insurance – Often requires the tenant to acquire coverage for liability from acts or events occurring on the premises and damage to the premises
  • Guaranty – May ask for a personal guarantee from tenants seeking to rent a commercial space in the name of a business
  • Indemnification – May include a right of the landlord to have the tenant defend them should they be sued as a result of the lease
  • Assignment – May allow the tenant to assign or sublet the lease


Benefits of Working with a Professional Leasing Agent


In order to negotiate the best deal possible, a tenant must identify when market conditions justify more favorable terms than a landlord has proposed and which direction the market is moving. A well-negotiated commercial lease can contribute to a business’s success, while an unfavorable lease can substantially impair a business. Therefore, businesses should adequately vet any lease before signing it, and evaluate their need for low costs and future flexibility.

This is where a good tenant representative in the form of an experience leasing agent comes in, making sure you don’t miss anything crucial.  He or she helps ensure you not only get the best deal possible on the right office space for your business, but also helps avoid costly mistakes.

Retaining a leasing agent with experience in leasing office space for your specific purpose, for example, those who have experience in leasing medical office space, can be particularly helpful because they understand how to structure terms and covenants of the lease agreement to fit the unique needs of the healthcare provider.  

Don't feel apologetic about broaching difficult subjects or asking tough questions during the lease negotiation.  In the end, it's your money and your office space.  If you pay close attention to the deals going on around you, take your time and seek good counsel, you can end up with a favorable lease that makes it easier for you.


Tags: Considerations When Leasing Office Space, leasing commercial space, office lease, medical office lease, tech business space, lease an office, lease a building, building lease, commercial lease, leasing agent

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