If you're ready to rent your first commercial space, here's what you need to know about the leasing process.
- When leasing a commercial space for the first time, the process can be complicated and confusing.
- In order to successfully rent a commercial space, you must take your time and review the agreement in full, before signing.
- Additionally, you must be flexible in the process, consult with an expert, and decide if you are renting for the long or short-term before entering into an agreement.
There's a lot to consider when you're leasing a commercial space for the first time. The process can be complicated, and numerous factors could impact your final decision.
"The tenant has to think through lease location versus cost, lease terms and duration … and whether or not the office space … provides options for growth or expansion of the business," said Jeb Ory, CEO of Phone2Action.
If you think you're ready to rent your first office, here are three important tips to follow throughout the leasing process. [Location matters. Learn how to choose your ideal retail space.]
Understand what your business needs in a space – now and in the future.
Much like shopping for a home or an apartment, looking for an office can be simultaneously exciting and overwhelming. However, being prepared can mitigate the stresses of your search. Don't dive into the process without having a clear idea of what your business wants and can afford, said Bobby Goodman, co-founder of Truss, a company that helps businesses find office space.
"To make the process seamless and successful, I recommend taking pause and prepping in advance of the search," he said. "This includes knowing how you will use your space, what amenities are desired, and setting 'price guardrails' to prevent going over budget. Each office space will have different features, so it's important … to understand [your] priorities."
You should also consider your trajectory and objectives for the near future to make sure a potential space can grow with your company, said Goodman: "Before touring any spaces, companies should ask themselves where they see the business in one, three and five years."
Take your time.
When you need a new workspace for your growing team, you might think it's best to rent the first space that meets your needs. However, Ory says it's best to take your time and preserve optionality for as long as possible, which may mean embracing short-term leases while you search for your perfect space.
"Locking in a multiyear lease when your business is growing quickly can inhibit growth and possibly even require you to stand up two different offices at the same time, which can create logistical challenges and cost inefficiencies," he said.
Ory noted you may even be able to find fully furnished office subleases and temporary coworking spaces until you're ready for a long-term lease.
"Our company moved four times within a single WeWork coworking space before we moved out to our own office," he told Business News Daily. "We saved tens of thousands of dollars by taking our time to find the right space, rather than moving to a place in a hurry."
Review your lease agreement carefully before signing.
Unless you're well versed in real estate, you're likely going to run up against some confusing phrases in your lease agreement.
"Much of the needed information regarding the office search is communicated in industry terms instead of everyday language that tenants can understand," Goodman said. "For example, a tenant might understand 'total rent costs' but not a 'triple net lease,' which a broker might say."
Don't ignore these unfamiliar terms or brush them off – make sure you go over your lease with a fine-toothed comb, said Eddie Navarette of FE Design & Consulting.
"Ambiguity can be common when it comes to the terminology in leases," he said. "It may be unclear who is responsible for payments, and these details may not be uncovered until down the line when it's too late. Don't be afraid to ask questions to get what you want – no one cares about your business more than you do."
Additionally, according to Reoptimizer, when you're renting commercial office space:
Consult with an expert. One of the top things to remember is that you will need the advice of a seasoned professional. No matter how much research you conduct, this is no replacement for talking to someone who has been working in the business for many years. There will always be elements of the process that you do not fully grasp or understand. This can leave you vulnerable to making major mistakes. However, by regularly consulting with an expert, you can minimize these risks.
Be flexible. Another great tip is to remember to be flexible in the process. Given that there is no way to predict the outcome with 100% accuracy, you must be flexible and be willing to make adjustments and alterations as needed. If you have a concrete outcome looming in your head, you will likely fail to live up to it in real life. If you are not willing to be flexible, you could miss great opportunities simply because they appear to require too much work.
Decide whether you're rent long-term vs. short-term. Additionally, according to Square Foot, you must also decide if you are looking to rent on a long- or short-term basis. In general, many leasers may expect you to rent the space for one to three years, and may provide you with a contract that asserts this. If you are not willing to make the level of commitment, think twice before signing on the dotted line.
- Make a list. Finally, as you tour various spaces, you may notice that your priorities and desires for an office space change. Make a list of places you want to tour, and carefully inspect each property before making your final decision.