by Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
Recent developments in commercial real estate might suggest that leasing is becoming less attractive. With ongoing low-interest rates, purchasing has become more affordable. Additionally, skyrocketing property values in some markets may make it feel like you’re missing out if you don’t own. Changes to lease accounting standards have also removed some financial benefits of leasing.
However, these shifts don’t mean it’s a bad time to be a tenant—or even a landlord. While owning property might seem better in some cases, leasing can still be the best option depending on your needs. Let’s explore why leasing remains a smart choice.
Why Leasing Space is Beneficial
The first advantage of leasing space is that it is often less expensive than buying. While you’ll incur some costs for deposits and tenant improvements, they are minimal compared to a down payment or the expenses of customizing a purchased property. Additionally, if you need a smaller or specialized space—like a Class A high-rise office or industrial property—leasing often provides more flexibility in size and type.
More Options with Leasing
Another reason to lease is the variety of options it offers. In most central business districts, the majority of available office space is for lease. Suburban markets may offer more owned space, but this is often limited to large vacant campuses or small neighborhood offices and condos. These extremes usually don’t fit the needs of most tenants, making leasing a more viable choice.
Flexibility and Freedom
Leasing also provides flexibility. When your lease expires, you can move on without the burden of selling a building. Selling a vacant property can take a lot of time, especially if you’re unwilling to drop the price. With leasing, you can quickly adjust your space to match your business’s evolving needs.
This flexibility also extends to maintenance and expenses. If your leased space requires significant tenant improvements, you can move to a new building and let the new landlord cover those costs as part of your lease agreement. If your current building needs repairs, your landlord is responsible. If they aren’t willing to address the issues, you can simply move when your lease ends, avoiding the need to invest capital in repairs.
Building Community and Networking
Another often-overlooked benefit of leasing is the community aspect. Sharing space with other businesses allows for networking opportunities. You can build relationships with vendors, and your employees can connect with others in the building, creating a sense of community that reduces turnover. Owning a standalone building can make it harder to access these locational benefits.
Leasing: Still the Best Option?
All these factors make leasing an excellent option, even in a changing real estate market. While lease accounting standards and the broader economy may change, if leasing matches your business’s needs, it’s likely still your best choice.
If you have any questions or need assistance finding commercial space, contact us anytime at (480) 330-8897 or via email at request@leveragedcre.com. We’re happy to help!
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 Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
Commercial leases are often lengthy and complex documents that can be overwhelming to read. However, it’s essential to carefully review every part of the lease before signing. While every term is important, certain sections of a standard commercial lease require extra attention. Here are the key areas you should focus on:
The length of your lease plays a critical role in your business’s stability. A longer lease may offer the benefit of a lower monthly rent since landlords prefer tenants who commit to extended terms. This helps them avoid frequent vacancies or renegotiations. However, if your business needs are likely to change soon, a shorter lease might be the safer choice. This way, you can avoid paying for unused space or dealing with costly penalties for breaking the lease. Including a sublease option can also provide flexibility, allowing you to rent out any unneeded portion of the space.
Rent and Security Deposit Terms
One of the most important parts of your lease is the rent and security deposit section. Don’t just look at the monthly rental rate. Instead, check for details about when rent increases might occur and by how much. Also, take note of any additional fees, your share of operating costs, and any allowances for improvements to the space.
Regarding the security deposit, see if you can negotiate its terms. In some cases, offering a letter of credit from a financial institution might allow you to waive the security deposit altogether.
Premises Terms
Many business owners overlook the premises terms in their commercial lease. This section defines exactly what part of the building you’re renting. For example, if you’re only renting a portion of the building, ensure that the contract includes access to shared spaces such as parking, storage rooms, lobbies, waiting areas, and conference rooms.
Use Terms
The use terms outline the rules governing what type of business activities you can conduct on the premises. It’s important to check for any restrictions that might limit your operations. For instance, other tenants may have exclusive rights that prevent competitors from being located in the same building. These clauses could block your plans to expand into other business lines in the future. Additionally, review the terms related to signage and advertising to understand the limitations on your branding efforts within the property.
Negotiation is Expected
Remember, the first draft of the lease is often crafted with the landlord’s interests in mind. However, this doesn’t mean you have to accept everything as-is. Landlords expect negotiation, so don’t hesitate to discuss adjustments that could benefit both parties and create a fairer contract.
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 Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
A commercial lease can feel intimidating, especially if you don’t deal with real estate regularly. Carefully reading your lease is crucial to ensuring you’re getting the best deal. While all parts of a lease are important, certain terms and clauses deserve extra attention. Here’s what you need to focus on:
You don’t want any surprises when it’s time to pay your first month’s rent. Carefully review the rent terms. Are there additional fees beyond the rent? When is the rent due, and how must it be paid? What are the penalties for late payments? Also, check the details of the common area maintenance (CAM). What exactly does it cover, and what doesn’t it include? Understanding these points helps you avoid unexpected costs later on.
Right of First Refusal
If you love your office space, you’ll want the option to stay when your lease expires. The Right of First Refusal clause gives you the opportunity to renew before the landlord offers the space to new tenants. Make sure this clause is clear in your lease to protect your future.
Definition of the Premises
This section outlines exactly what space you’re renting. Ensure the lease accurately states the office’s square footage. If the landlord has promised access to shared areas—like restrooms, reception areas, or break rooms—these should also be clearly listed. Verbal promises are not enough; everything must be in writing.
Subleasing and Assignment
Business needs can change unexpectedly. A Subleasing and Assignment clause allows you to rent out part or all of your space to another tenant if necessary. Make sure your lease offers flexible subleasing terms to give you more options if your situation changes.
Use and Exclusives Clause
Some leases restrict what type of businesses can occupy the building. Be sure to check if these restrictions will limit your business growth. You don’t want to be blocked from expanding into a new industry or niche due to the lease. Additionally, the Exclusives Clause can protect you from competitors moving into the same building, which might be crucial depending on your line of business.
Maintenance Clause
What happens if something in your office needs repair? The Maintenance Clause defines who is responsible for maintenance and repairs. Make sure it clearly outlines whether you or the landlord is responsible for handling maintenance costs and arrangements. Clear responsibilities can save you from future disagreements and headaches.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
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 Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
Typically, companies start looking for new commercial real estate space as little as nine months before their existing lease ends. But, unfortunately, they’re doing it wrong. To successfully find and negotiate space, the savviest tenants can spend two to three years planning for a move. Here are some steps that can help you in getting the ideal space for your commercial real estate:
Step 1: Determining Your Space’s Suitability
The first step in looking for a new space is to step back and look at your existing space. Sometimes, there’s nothing wrong with your current commercial real estate that a few nips and tucks won’t fix. However, if your existing space works and your rent is at the market, staying is usually cheaper and more accessible for your business to avoid the interruptions caused by moving.
If you decide that it makes sense to look at a new space, the first step is to find someone to help you with the process. A professional tenant rep can save you time by helping with every step in the process while also delivering better results due to his high level of expertise and access to unique tools. Usually, your first step is to go back to the broker that brought you to your current space. However, the market is constantly in flux, and it’s also a good idea to reach out to other active brokers in your area. Talk to similar companies to see who they have used in the past, as well.
Step 3: Researching Markets and Submarkets
The site selection process can be the most time-consuming step in finding a new piece of commercial real estate to occupy unless you are sure that you want to stay in the same general area. Barring that, you will want to study demographics and economics, conduct site visits, and find the perfect place for your business. Even with a commercial real estate broker’s help, this process can easily take six months, especially when you factor in travel.
Step 4: Discussing with Your Existing Landlord
Once you generally know what you want, it’s time to sit down with your landlord. You will probably still have 18 or so months left on your lease at this point, but it’s still a great time to have a discussion. One possibility is that your landlord might be willing to sweeten the pot to keep you. Another is that they might want to get you out sooner to accommodate another tenant. In a worst-case scenario, you waste an hour, but you still retain all of the rights you have under your lease.
Step 5: Touring Spaces
Once you know that you’re moving, it’s time to start seriously looking at spaces. Your commercial real estate broker can help facilitate this entire process by finding potential sites and by arranging your tour. This process can usually take a few months.
Step 6: Negotiating and Signing
Once you’ve found the perfect space and a couple of backups, it’s time to start the negotiation process. The process’ speed varies based on your market, but it’s best to earmark a couple of months so that you aren’t rushed into taking an unsuitable offer.
Step 7: Building the New Space Out
Finally, you have to wait for your space to be built out and installed in all its systems. Even simple build-outs can take 60 or more days.
Optional Step: When Bad Things Happen to Good Commercial Real Estate
To be safe, wise tenants build a few extra months into their schedule. That way, if something goes wrong, they still have some spare time.
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 Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
Negotiating a commercial lease often involves compromise. However, it’s important to ensure the agreement isn’t skewed entirely in favor of the landlord. Follow these 10 tips to secure the best deal when leasing commercial real estate:
1. Have an Expert by Your Side
A tenant rep broker can protect your interests during negotiations. They have in-depth knowledge of the market and can guide you toward a fair deal. Best of all, the landlord typically covers their fees, meaning you won’t have to pay for their services.
2. Think Beyond the Initial Contract
The first draft of the contract will always favor the landlord. While they might claim it’s a “standard” lease, don’t assume it’s non-negotiable. Treat it as a starting point for discussions, not the final word.
3. Calculate All Costs
Don’t just consider the rent. Include Common Area Maintenance (CAM) fees and any other costs when assessing if the total monthly payment fits your budget. This will help you determine if the offer is truly fair.
4. Start Early
Begin your search for office space well in advance. If you wait too long, you may feel pressured to accept a deal out of urgency. Having more time gives you leverage and allows you to walk away if the terms aren’t favorable.
5. Read the Contract Carefully
Review every detail of the contract. Ensure you understand each term and clarify anything that’s confusing. Never sign until you’re confident about every aspect.
6. Prioritize Your Needs
Create a list of amendments and concessions you want to include in the contract. Rank them in order of importance, so you know which are deal-breakers and which are negotiable. This will help you navigate the give-and-take of negotiations more effectively.
7. Know the Market
Understand what other tenants in the area are paying and what lease terms are genuinely standard. This knowledge will strengthen your position and show that your requests are reasonable.
8. Involve Your Team
Before signing, involve key members of your management, finance, legal, and operations teams in reviewing the contract. Fresh eyes may catch important details you missed.
9. Fight for Flexibility
Wherever possible, push for flexible terms. Consider subletting options, renegotiation rights, or early termination clauses. These can save you from future complications if your business needs change.
10. Be Ready to Walk Away
If the landlord refuses to meet you halfway on your key requests, don’t be afraid to walk away. You’re better off pursuing another property with more favorable terms than settling for an unsuitable deal.
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!
