Leasing Your First Commercial Property
Know How Much Space You Need
This is the first step in leasing any property. Think about not only what you need now, but what growth you are expecting in the next 5 years. While your space today may not be large enough to accommodate your 5-year goals, make sure you mention this to your leasing agent. They can advise you on ways to make sure you are able to get more space or get out of a space that is too small and plan for your future needs.
Set Your Budget
Because lease rates vary, have a total cost in mind for your occupancy of your space. Don’t forget utility expenses. Some leases may include some of your utilities, so having a total budget as your measuring tool will allow you to compare each property evenly.
Commercial leasing takes time to get done. Make sure you allow yourself enough time to find a place, so you aren’t rushing to get moved in. It could take as little as 30 days to as long as 6 months or more (if the space needs work) to get you moved in.
Be prepared to be asked to commit for a long term lease. While this is not always a deal breaker for a landlord, many will simply not be able to take a lease term lease than 3 years due to their financing restrictions on the property. Ask your leasing agent about early out or expansion options to accommodate your future growth.
Up Front Money
Be prepared to pay your first months rent up front, plus a security deposit. Generally, a deposit will be equal to one months rent but can be more, depending on the risk of loss for the Landlord. Your agent can give you a better idea on what to expect from many Landlords and properties.
Putting it in Writing
Once you find that perfect space, the next step is a Letter of Intent. This is generally non-binding and your offer to lease from the Landlord. The Landlord may accept your offer as written, counter your offer or in rare instances, reject your offer outright. Your agent will assist you in drafting a Letter of Intent that will be well received and show you are a serious tenant.
Improvements to the Space
Many spaces can be improved by you or the Landlord, depending on the term of the lease. Remember, the Landlord may not allow you to make changes to the space and require their own contractors to be used. No matter who does the work, the tenant will generally pay for these improvements, either directly or indirectly in the form of higher rent.
Be prepared to personally guarantee your new lease, even if you are incorporated or have an LLC. Unless your business has significant history and revenue, it is very likely that you will be ask to guarantee payment of the monthly rent. If you have a concern about this, ask your agent about ways to limit your risk in these situations.