Before you lease a space for your business, understand these basic facts about commercial leases.
Even the most scrupulous landlord has a clear agenda: profit. There are many obscure methods landlords use to ensure a profit, that a lessee may simply be unaware of.
Your commercial lease may determine the success or failure of your business. It is crucial to understand exactly what a commercial lease entails. There are the basic costs – monthly rent per month, utilities, etc. And then there are the lesser known hidden costs that are a part of every commercial lease; real estate tax escalations, capital improvements (or "build-outs," for which the landlord’s legal obligation is a gray area), loss factors, etc.
Even the basic costs can be inflated by a landlord. Bear in mind that the terms of the lease that the landlord presents are negotiable – but only to a point. That point is very much dependent on the current real estate market. It is of paramount importance to be aware of the current trends in the commercial real estate market of your particular location. Knowledge is power. For example, one might assume that the commercial real estate market in, say, midtown Manhattan is extremely competitive. And while there are major competitors for available real estate in Manhattan (think J.P. Morgan), there are plenty of recent vacancies as well. Know your facts.
Many decisions should be made based on the specific industry. The length of the lease, for example, can very much depend on the industry. It is much more difficult to find a lease for, say, a retail business than a warehouse. Signing a five-year lease on prime piece of retail space makes a lot more sense than signing a five-year lease for a warehouse space.
Being an informed consumer is critical when you are looking to sign a lease on a commercial space. At the end of the day, though, you are not a professional in commercial real estate. An expert in commercial real estate may seem extraneous now, but it will mitigate any future hassles and unpleasant surprises.