While renting your first office or retail space can be exciting, you may find yourself confronted with a world of questions and concerns over how to do so wisely. Rightly so– location, rental costs, aesthetics, and more can impact the success of your business as much as the quality of the product or service your business is offering. To ensure your company makes the right decision when it comes to renting your first office or retail space, consider the following tips.
Understanding Your Lease
Perhaps the most important thing all renters should do before entering into a rental agreement, which is legally binding, is thoroughly review and understand the terms of the lease. This means not only knowing what costs are your responsibility as a renter, but also understanding procedural terms such as how to renew or cancel a rental agreement and how to resolve rental disputes. Your commercial lease will have terms that you may not be familiar with, quite different from standard residential leases. Specifically, be sure you understand who is responsible for maintenance, upgrades, and liability clauses. Further, most leases will lay out specific rules set by the landlord for the renter to follow, such as parking, subleasing, types of business that can be conducted. Make sure you understand the terms of the commercial lease and agree to these terms so that you do not find yourself facing fines, eviction, or other penalties from your landlord. Have an attorney look over the lease.
Negotiate Your Lease
Plan on negotiating rental terms for your commercial lease. The agreement is a business deal where both parties are responsible. The terms are routinely negotiated, much moreso than residential leases. The length of the lease, out-clauses, which party is responsible for repairs, and just about any other clause in a lease is up for discussion. Absolutely do not hesitate to set a meeting to discuss particulars. emphasizes to renters that they can with their landlord before signing.
Costs and Renter Responsibility
Rental property can be expensive, but should be regarded as an investment to help your business grow. While investments always entail a degree of risk, the best investments are educated. Before renting a space, you should not only comprehensively budget your business expenses with consideration of expected rental costs (like rent amount, utility estimates, internet), but also allow room in your budget for unexpected costs such as those not covered by your landlord. Building upgrades, surprise repairs, fixtures such as lights and sinks, appliance repairs, fees and taxes are examples of costs that are often overlooked.
Choosing the Right Space
Before you sign any rental agreement, make sure the space you are renting suits your business model and vision. Here are some things to consider:
- What would the day-to-day operations look like in this space?
- Is there enough space not only to operate at present capacity, but also to allow for future growth and higher business volume?
- Does the space require updating and additional expenses to achieve the aesthetic vision of your business?
- Does the space include the necessary or desired features you believe your business should have in order to succeed? (e.g. parking, meeting space(s), adequate facilities, etc.)
If the space itself cannot meet the demands of your specific business, it is probably not the right place for it. To ensure you do not overlook any of these requirements, it may be helpful to make a list of features you believe your space must have, as well as a list of features you would like it to have, before touring a property.
Location
The importance of location will vary depending on your specific business model. If you offer services that are primarily or exclusively given remotely, office location may not have much of an affect on your ability to offer those services. If this is not the case, it is important to realize that office location can make or break the success of your business. Here are some questions to ask regarding location:
- Is the office centrally located enough to accommodate the commutes of your in-office team members? Is it conveniently located for your target clientele and customer base?
- Will clients or customers be able to find your office with ease? Will they feel safe and comfortable in the neighborhood in which your office is located?
- Does the location of your office suit your business type?
- For example, if you are a restaurant owner and your restaurant relies on foot-traffic to attract customers, it probably is not wise to rent a restaurant space in a part of town that does not see foot-traffic.
Market Trends and Cost of Living
This may seem like a concern reserved for property owners, but renters are equally affected by the ever-changing real estate market as well as national and local changes in cost of living. If the location of your office is predicted to grow in commercial density and value, you must be prepared to see increased rental prices or increased business competition on your block. If food, energy, and other living costs are increasing in your area, you must make sure your business’s financial plan accounts for any effects this may have on commercial renting expenses.
As predicted by The National Law Review, inflationary rates in the United States are likely to continue to rise through 2023. Because of this current trend, they recommend that commercial property renters pay special attention to how inflation in their area is affecting rental costs as well as escalation rates defined in commercial rental agreements.
Above all, it is essential that you consider not only the practical implications of renting an office or retail space, but also your business’s specific needs that only you, as the business owner, can understand and envision. If you approach renting your first office or retail space with care and concern, you will have better luck finding a place that feels like it is exactly where your business needs to be.
Article by Born Realist