by Phill Tomlinson | Sep 6, 2021 | All Articles
A commercial lease can seem intimidating, especially if you don’t deal with real estate regularly. However, reading your lease carefully is crucial to ensure you secure the best deal for your office space. While every part of the lease is important, certain terms and clauses need extra attention.
Rent and Common Area Maintenance
To avoid any surprises when it’s time to pay rent, it’s essential to review the rent terms thoroughly. Ensure you understand any additional fees beyond the base rent. When is the rent due, and how must it be paid? Familiarize yourself with penalties for late payments and check how much you’ll need to pay for common area maintenance. This fee should also clearly define what it covers, so there are no surprises later.
Right of First Refusal
If you want to remain in the office space when your lease ends, you should ensure a right of first refusal clause is included. This clause gives you the first opportunity to renew your lease before the landlord offers the space to other potential tenants. Securing this right can be vital if you plan to stay long-term.
Definition of the Premises
The definition of the premises outlines the exact space you’re renting. Make sure the square footage of your office is correct in the lease. Additionally, if your landlord promised access to shared facilities like restrooms or break rooms, these areas should also be clearly mentioned in this section. Verbal promises should be written in the contract to avoid confusion.
Subleasing and Assignment
If your business needs change, the ability to sublease or assign the space to another tenant can help reduce costs. Ensure your lease includes flexible subleasing rights, so if your business outgrows or no longer requires the office, you have the option to lease it to someone else without breaking the agreement.
Use and Exclusives Clause
It’s important to understand whether there are restrictions on the types of businesses allowed in the building. Will these limitations prevent you from expanding into new sectors in the future? Additionally, check if the lease protects you from having competitors move into the same building. This exclusives clause can be essential in protecting your business interests.
Maintenance Responsibilities
Who is responsible for covering repair and maintenance costs? The lease should clearly outline who pays for maintenance and who arranges repairs. Understanding this before signing the lease will help prevent future misunderstandings or costly disputes.
Conclusion: Protect Your Business by Reviewing Key Lease Terms
Carefully reviewing your commercial lease is essential to protect your business and avoid complications. Pay special attention to the rent, subleasing rights, maintenance clauses, and other key terms. It’s always worth negotiating or clarifying lease terms before signing to secure the best outcome for your business.
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
by Phill Tomlinson | Sep 6, 2021 | All Articles
Most companies begin searching for new commercial real estate about nine months before their lease ends. However, this timeframe is often too short. Savvy tenants spend two to three years planning a move. Here are the essential steps to help you find and negotiate the ideal space for your business:
Step 1: Evaluate Your Current Space
The first step in finding a new space is to assess your existing one. Sometimes, minor changes can fix any issues. If your current space works well and the rent is reasonable, staying might be more cost-effective. Staying put also avoids the disruptions caused by moving.
Step 2: Hire a Commercial Real Estate Broker
If you decide to explore new options, your next step is finding a professional tenant representative. A broker can save you time by guiding you through every step and providing better results due to their expertise. Consider reconnecting with the broker who helped you find your current space. However, it’s wise to also speak with other active brokers in your area. Talk to similar businesses to see which brokers they recommend.
Step 3: Research Markets and Submarkets
The site selection process is often the most time-consuming part of finding new commercial real estate. If you’re open to moving outside your current area, research the demographics and economics of different markets. Conduct site visits and evaluate which locations align with your business needs. Even with a broker’s help, this process can take up to six months, especially when factoring in travel.
Step 4: Discuss with Your Current Landlord
Once you have a general idea of what you want, it’s time to talk with your current landlord. At this stage, you may still have 18 months left on your lease, but it’s a good time for negotiations. Your landlord might offer better terms to keep you or may prefer to let you out early for another tenant. In the worst-case scenario, you’ll lose an hour of your time, but still retain all your rights under the current lease.
Step 5: Tour Potential Spaces
Once you’ve confirmed your move, it’s time to start touring new spaces. Your commercial real estate broker will help find potential sites and arrange your tours. This process typically takes a few months as you narrow down your options.
Step 6: Negotiate and Sign the Lease
After finding the ideal space (and a couple of backups), you can begin negotiations. The length of this process varies depending on the market, so it’s best to allow a couple of months. This will prevent you from rushing into an unsuitable deal.
Step 7: Build Out the New Space
Once the lease is signed, you’ll need to build out the new space and install any necessary systems. Even simple build-outs can take 60 days or more, so plan accordingly.
Optional Step: Allow Extra Time for Unforeseen Issues
Smart tenants build a few extra months into their timeline. This buffer helps ensure that, if anything goes wrong, you’ll still have time to adjust your plans without stress.
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
by Phill Tomlinson | Sep 6, 2021 | All Articles
While negotiation involves making compromises, it’s essential to ensure that your commercial lease isn’t entirely in the landlord’s favor. To help you get the best deal when leasing commercial real estate, follow these 10 tips:
A tenant rep broker can protect your interests during negotiations. These brokers are experts in commercial real estate and know about the commercial lease. They can advise you when you have a fair deal. Best of all, the landlord typically pays the broker’s fees, so their services come at no cost to you.
2. Think Beyond the Initial Contract
When presented with an initial contract, landlords may claim it’s standard and suggest no negotiation is necessary. Don’t be fooled by this tactic. The first version of the contract favors the landlord. Consider it a starting point for negotiations.
3. Calculate All Costs for Commercial Lease
Never focus solely on the rent. You must also factor in Common Area Maintenance (CAM) fees and other potential costs. Make sure your total monthly payment aligns with your budget and is fair.
4. Start Early
Begin your search for commercial office space as early as possible. Having time on your side gives you an advantage. When you’re not rushed, the landlord can’t exploit a sense of urgency. Plus, you’ll have time to explore other options if you can’t reach a favorable agreement.
5. Review the Entire Contract
Read every line of the contract carefully. Ensure you understand all terms and ask for clarification on anything that seems confusing before signing.
6. Prioritize Your Requests
Make a list of the amendments and concessions you want before negotiating. Rank them by importance. Decide which are deal-breakers and which you can compromise on. This will help you stay focused during the negotiation process.
7. Know the Market
Research the local market to understand what other tenants are paying and what contract terms are genuinely standard. If you don’t use a broker, ensure you’re well-informed to back up your requests.
8. Involve Your Team
Before signing the contract, have your management, finance, legal, and operations teams review it. Fresh perspectives may uncover details you missed.
9. Fight for Flexibility
Negotiate for flexibility in your lease. For example, include subletting clauses or the ability to renegotiate or end the lease early. This can save you from future headaches if your business needs change.
10. Be Prepared to Walk Away
The most important tip is to be willing to walk away. If the landlord isn’t willing to meet you halfway on key concessions, it’s better to explore other options. You’ll find a fairer deal that fits your business needs elsewhere.
Even after outlining all the information above, deciding whether to go for a 1031 Exchange or a Cash Refinancing can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your business and investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com.
by Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
Tenant improvements refer to customizations made to a leased space to meet the tenant’s specific needs. A tenant improvement allowance is a sum of money that the landlord provides to help offset the cost of these modifications. To fully understand tenant improvement allowances, it’s important to know how they work in both new and existing spaces.
Tenant Improvements in New Spaces
Office spaces are typically delivered in shell condition. This means that while common areas might be complete, individual spaces are often unfinished. From a developer’s perspective, this makes sense. They don’t know if a tenant will lease an entire floor or just part of it, nor can they predict how the tenant will want the space built out.
Leaving the space unfinished allows tenants to customize their portion of the floor according to their needs. This flexibility is a major advantage, especially when you want to design your office with specific materials and layout preferences. Additionally, customizing a new space is often less expensive than altering an existing one.
Tenant Improvements in Existing Spaces
Most available office spaces will already have been built out with tenant improvements for the previous occupant. While these spaces may not perfectly match your needs, they can offer opportunities. If you find a pre-built space that aligns with your requirements, you can save thousands in occupancy costs. You won’t need to spend much, if anything, on customization, and the landlord avoids the cost of demolition and renovation.
However, taking an existing space and reconfiguring it can be costly. Besides construction expenses, you’ll need to account for demolishing the previous tenant’s improvements. Be sure to evaluate what can be reused, such as ceiling grids, tiles, or doors. These seemingly minor elements can save multiple dollars per square foot, allowing you to stretch your tenant improvement budget.
Tenant Improvement Allowances
In many cases, landlords will help tenants cover the cost of customizations. Tenant improvement (TI) allowances are standard for new spaces, as they are part of finishing the building. These allowances are also common for pre-configured spaces in many markets. However, the amount of the TI allowance depends on several factors:
- New spaces usually offer more generous allowances than pre-built spaces.
- Leases with higher rents or longer terms typically receive more TI money.
- Landlords tend to offer larger allowances in markets with higher vacancy rates.
If your landlord provides a TI allowance, read the fine print carefully. Requirements like using specific contractors or materials can impact how much value you get from the budget. Consulting with an experienced tenant representative can help ensure you secure the best deal.
Even after outlining all the information above, deciding whether to go for a 1031 Exchange or a Cash Refinancing can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your business and investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com.
by Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
With rents rising and interest rates still near historic lows, the balance might seem to favor purchasing. However, leasing remains a strong option for many companies. Let’s explore key factors to help you decide which option is best for your business.
Reasons to Purchase
Purchasing becomes more attractive when your company’s needs are stable and predictable for the long term. If you know what your business requires now and won’t need changes for a decade or more, purchasing might be a wise choice. Owning the space gives you total control over its use and provides long-term certainty.
Additionally, purchasing allows you to benefit from potential property appreciation. While appreciation can be valuable, tying up capital in real estate may outweigh the benefits for many businesses. However, if you plan to use appreciated property as an exit strategy or need to control prime real estate, purchasing could make sense.
Benefits of Leasing
Many of America’s most successful companies choose to lease for several reasons. Leasing is generally more flexible, less capital intensive, and provides more options.
Leasing offers flexibility in several ways. Although you can technically sell a building you own, finding a buyer can take months or even years. On the other hand, with a lease, you can move out once it expires. You also leave any necessary building work to the landlord. Additionally, if you have a lease with renewal options, you gain more control by extending the lease.
Leasing Conserves Capital
Leasing helps businesses conserve capital in three primary ways:
- Lower upfront costs: Leasing typically requires a smaller initial investment compared to purchasing. Rent and security deposits are usually less than loan costs and down payments.
- Lower payments: Lease payments are often cheaper than mortgage payments.
- Balance sheet benefits: Even with accounting changes, leases still offer advantages compared to building ownership when considering your business’s balance sheet.
Need Help Deciding?
If you’re weighing the lease vs. purchase decision or need commercial space, contact us anytime. We’re here to help! Reach out to us at (480) 330-8897 or via email at request@leveragedcre.com.
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
