|
Leasing space for a business can be a complicated
process. There are several variables to consider from location
to cost and even more factors when it comes time to signing a
lease. Below are general guidelines for how the leasing process
works and what you should expect as a business owner.
*The scenario below offers a general summary of the leasing process.
The steps may vary depending on a variety of factors.
1. Identify Needs:
|
Location: Location is possibly
the most-used word in real estate and there's a reason for
it. Location affects your visibility, the quality of your
space and the value. Ask the simple questions - Where are
our customers? Our market region? Our employees? What other
businesses offer a synergistic relationship? Where is the
competition located?
Cost: A good term to learn
when speaking about cost is "effective rent."
Your monthly rent will be determined by a few variables:
lease rate per square foot, free rent or other concessions
provided by the owner, utilities and other costs if the
lease is Triple Net, additional tenant improvements that
are amortized into the rent, and annual rental increases
as provided for in your lease. See the sections on Lease
Types and Calculating
Rent to learn more.
Type of Space: The type of space you need
is going to be determined by the type of product or service
you provide. See the section on Property
Types.
|
2. Looking for space: Looking
for space can be done a number of ways. One option is to drive
the
market and call the listing agents of the properties that match
your criteria. The challenge is you won't know anything about
the property or it's asking rate until you call. Another option
is to secure the services of a tenant representative. They can
show you what's available in the market in the locations and
price ranges you want. The next step is to tour your top picks
and perform
the analysis on which property best fits your business needs.
3. Letter of Intent: A Letter
of Intent is sent to a property owner stating your intent or desire
to enter into a lease agreement at their property. These agreements
are not leases so they are non-commital in nature but they do
establish your intent to negotiate a term with the landlord.
4. Lease Negotiations: Lease negotiations
involve several factors including lease rate, length of term,
concessions, rate bumps, and renewal options. There are typically
many sections of a lease that establish the terms of your agreement
with the owner. The negotiations occur regarding these points
and can take anywhere from a few days to several weeks or months
to complete depending on the complexity of the lease. An owner
will also want to establish your financial credibility as a tenant
- in other words, your trustworthiness to pay the rent due the
owner as part of your agreement. Financials and other documents
are used to establish this credibility.
5. Target Occupancy Date: The
date set for occupancy can be subject to change depending on the
amount of tenant improvements (TIs) that are required. These improvements
come in many forms starting with simple paint and carpet to constructing
demising walls. The more complex the TI, the more likely the target
date will change. The critical stage in this process is when the
TIs are completed and a Certificate of Occupancy has been issued
for the space.
6. Move In: The fun part begins!
|
