Decisions about location and the ins and outs of leasing commercial space can be significant factors in determining a firm’s long-term profitability. That’s because the cost of leasing space is often one of the biggest numbers on the profit-and-loss statement. The greater the expense, the greater the potential impact on the bottom line. Your goal: rent space for a cost that makes sense in light of your company’s projected income. Not an easy task.
Here are four pointers to help you avoid serious pitfalls when leasing commercial property.
- Start early. At least six months before you plan to move in, begin the selection process. Scout out locations and narrow your choices. Waiting until you’re desperate for space may leave you with fewer options. Leasing should not be an impulse purchase. Starting early may also provide opportunities to observe walk-by or drive-by traffic, the location’s visibility, and the habits of neighboring tenants. It may also provide more time for tracking current spending, which will help you develop a better understanding of the level of lease payments your business can afford to pay.
- Compare properties. In addition to identifying a property that’s located near your client base, comparison shopping can provide negotiating leverage. By obtaining lease proposals from several landlords, you may be able to play one against another and carve out a deal that’s especially advantageous to your firm.
- Sweat the details. Read the lease; then read it again. Pay special attention to the length (term) of the lease, renewal options, and scheduled rent increases. You’ll also want to scrutinize clauses describing your responsibility for utilities, maintenance, and upkeep of common areas and systems. The agreement should spell out your options for subleasing and delineate default provisions. For example, the lease may specify that you’ll be locked out immediately for failure to pay the current month’s rent, or may specify a grace period during which you can get caught up. Termination options, security deposits, allowances for leasehold improvements — all should be specified in the contract.
- Seek professional help. Especially if you’re establishing a main office in a new space, it makes sense to hire a real estate attorney or other professional to review the lease terms before signing. An experienced broker may also provide assistance when negotiating lease terms. Careful evaluation and bargaining at the front end may save dollars and avert headaches later on.