What to Know Before You Sign a Commercial Real Estate Lease

Whether you’re looking for office, retail, or manufacturing space for a startup business or seeking to expand your existing business, it’s important to understand the ins and outs of commercial real estate leases before you sign on the dotted line. Here are four topics you’ll want to discuss with your commercial real estate agent before you commit to a lease.

1. Cost: Your real estate agent can tell you the average lease costs in the area you’re looking at. Certain high-traffic or otherwise more desirable areas will cost more than less desirable areas. In addition to asking what the cost is per square foot, it’s important to find out what is included in the total price. Are there any common area maintenance (CAM) costs, such as for maintaining courtyards, entryways, and the like? Within the space itself, does the cost include just the basic “shell” (white walls and concrete floors) or more? Are you responsible for property taxes, property insurance, utilities, or trash collection?
2. Traffic: If your business is one that will rely on foot traffic, such as a restaurant or retail store, find out the traffic numbers of the locations you’re considering. Determine if there are any large anchor stores to draw more traffic, or if any are planned. If your business is a destination, you need ample parking that allows customers to stay for as long as they need. A knowledgeable commercial real estate agent should be familiar with the area and have car counts, demographics, and other information that you need.
3. Amenities: Does the location have its own private restroom facilities, or will you need to share with the other tenants in the building? Does the building have central air, a security system, and other amenities? Maybe the most important question today is whether the building is wired for high-speed Internet.
4. Terms: Are you considering a short-term or long-term lease? Moving is a headache, and it doesn’t send a good message to customers if your business is constantly moving. Plan for the future and make sure the space is big enough to grow with you for at least a few years. Will you eventually be hiring more employees or expanding your business’s service offerings? Ask about the possibility of expansion within the same location. Also keep in mind that signing a longer lease may enable you to negotiate special terms, such as adjustments to rent during slow seasons or a few months’ worth of free rent for moving in. Also make sure you know what happens once the lease is up. Are there controls in place to ensure your rent won’t double? If you have any doubts, be sure to have your attorney look over the lease before you sign.