Leasing commercial office space is a common topic that many business owners pay a lot of attention to. Success or failure in this decision depends on one’s ability to select and then negotiate the commercial real estate that is best suited to a business. After selecting the correct location for the business and making the final rental decision, the next phase is the leasing process which will involve formulating important parts of the lease. Next is this process from start to finish.
Step 1:Analyze the requirements and needs of the lease
The rapidly changing business world believes that the words “growth” and “risk” are interchangeable. When insuring commercial property for a business operation, it is both exciting and scary. Sure, a business aspires to success, but it can run into various dangers along the way. This is common in the execution of any type of operation, so the owner must stay focused and concentrate on meeting all the basic objectives.
Basic goals for acquiring a new property:
- Increase– The new location should provide room for growth and expansion of the business.
- Transferable– The agreement must be transferable without penalty.
- KING– The new location must generate a high return on investment throughout the duration of the contract.
- Increase profits– The new location should help increase cash flow to offset the cost of relocation and still allow a positive net income for the business.
To avoid future complications, it is important for a business owner to understand and analyze the terms of the office lease. Both the tenant and the landlord must know the obligations, terms and conditions relevant to the rental of the property.
The terms of the lease should clearly describe the following:
- Contract period– Clearly indicate when it begins and ends.
- Monthly payment – Declare any escalation of the monthly rent.
- Annual lease amount– Describe the total rent paid in one year.
- Category of the lease– Indicate specifically if category is net or gross.
- Clauses– As appropriate for both the tenant and the owner.
- Renewal– The right to renew the contract, generally by both parties.
- Obligations of both parties– Specific statement of who is responsible for which office elements, such as reforms, repairs and maintenance.
- Security deposit– The amount of deposit that is required, as well as the conditions for its return to the tenant once the contract has been satisfactorily completed.
- Termination rights– Define how both parties can terminate the contract.
- Taxes– Detail of which party is obliged to pay the assessed property taxes.
- Utility services and amenities
- Furniture and equipment
- Physical dimensions
- Adequate lighting
- Office cubicle dividers
Step 2:Inspect the facilities
After determining the basic requirements of the business, it is important to visit the various properties available to rent for space planning and general comparison purposes. Make sure the new location meets the needs of the business.
Step 3:Secure the necessary documents
Once a decision has been made on which property to rent, the final documents must be drawn up to process the lease. The necessary documents are:
- Intention letter
- Offer and acceptance agreement
- Leasing contract
- Conditioning period
All documents should be prepared in advance so that either party can have a real estate broker or attorney review the documentation if necessary.
The commercial leasing process can be long; With proper guidance, it can be headache free and a successful outcome for both the landlord and the tenant. For those interested in the final steps of ‘Advice, Negotiation, Forms and Transfer’, that part will be covered in another article. The first steps listed here to analyze, inspect and insure will hopefully lead any business to securing the best commercial office lease for their business!