Renting or leasing business space should not be difficult. Yet, many small businesses feel vulnerable as they look to move into a preferred location. The following tips will help impress a landlord and secure the property you need to help grow your business.
1. Hire an agent. Using a commercial real estate agent will demonstrate that you're serious. Of course there are fees associated with using an agent, but it's worth it. Unlike the consumer real estate market, it is often difficult to identify listings. An agent can uncover properties that you could never pinpoint on your own.
2. Personal guarantee. Offering a personal guarantee when renting commercial property means that if the business is not able to pay the rent then you are personally liable. This also means that your landlord will likely want to run a check of your personal finances and credit history.
3. Length of lease. The longer the lease, the more appealing to the landlord. Be open and flexible when considering the length of the lease. Commercial leases are generally longer than residential leases. Terms of five or even 10 years are not uncommon in commercial real estate.
4. Sublease clause. The ability to sublease your space is not favourable for the landlord. While it offers some protection if you are no longer able to pay the rent, landlords frown upon it. Avoid a sublease clause, if possible.
5. Exit clause. The exit clause includes a penalty for early termination. Such clauses cause concern for landlords and should be avoided.
6. Security deposit. There are no limits or standards as to how much a commercial landlord can require for a security deposit. Yet, a larger deposit is much more desirable to a landlord.
7. Exclusivity. While exclusivity clauses may help protect you from the competition moving in next door, the probabilities are unlikely and such restrictions are not recommended.
8. Parking. Providing parking is a definite bonus, yet it could be costly. Eliminating the need for parking will not only keep your rent low, it will make you a preferred tenant.
9. Referrals. Referrals in the commercial real estate market are similar to that of the consumer market. Past landlords are great references for new landlords.
10. Tenant incentives. Receiving extras is always a nice surprise, but go into a deal expecting little. If a landlord offers additional incentives, it's a bonus! There is always uncertainty in negotiating any deal. Commercial real estate is no different. Be clear what you want and what you're willing to pay.
Following those tips will help any small business secure the property they need to continue to grow and prosper.
Richard Crenian is the founder and president of ReDev Properties. Since its founding in 2001, Richard and ReDev Properties have grown the asset management company using a long-term approach to manage over 25 commercial properties, primarily located in Western Canada, on behalf of over 2,500 investors worldwide.