Leasing a Commercial Property
Most every business owner needs to consider commercial real estate at some point.
Finding a small business space for rent involves more than finding the perfect location at a price you can afford. Businesses also need to sign a lease, which is a complex document that typically favors the landlord and a business’s success can hinge on a lease’s provisions.
But the terms of a lease are usually flexible, and with a little know-how, you can negotiate terms that work for both yourself and landlord.
What is Commercial Real Estate?
Commercial real estate is essentially business property. This could mean an office building, restaurant, mall, or boutique. Basically any property that is used for the sale of goods or services.
Typically, businesses lease commercial space from whoever owns it. Think about an office building that includes a law office, restaurant, book store, and an industrial supply store. Each of these businesses would pay rent to the individual or company that owns the property.
The individual stores within a mall or strip mall, and restaurants within a food court, tend to rent the retail space as well.
Some commercial real estate buildings may be made up of a large commercial space, like a mall or building, while others are single spaces, such as a restaurant, coffee shop, or a standalone store.
What’s in a Commercial Lease?
While there are many similarities between a Commercial Lease and a Residential Lease, there are also many differences. Finding a small business space for rent is exciting, but leases can be complicated, and they shouldn’t be signed without first understanding all that is included. These are key areas to consider before you sign on the dotted line.
Commercial leases tend to be for longer periods, and allow for things that residential leases do not, such as:
- Renovations to match branding or professional needs (as permitted by a landlord)
- Exclusive use, which can limit how many professionals in the same industry use the building
- Parking for customers, which may be included in the rent, or added as a fee
- Property taxes and operating costs/utilities for the building as a whole
- Business terms, such as what the space may be used for
In a commercial lease, the landlord or owner of the property may choose what to allow on the property, and whether or not they will assist in the cost for renovations for certain businesses.
It is the tenant’s responsibility to pay rent on time, adhere to the lease agreement, and avoid any illegal activity.
Commercial leases generally fall into one of three major categories based on how the building’s operating expenses are passed on to tenants:
- Gross or full-service lease. You pay a flat monthly rate from which the landlord pays all operating expenses, including utilities, property taxes and maintenance. This is a simple and convenient option for tenants. Just make sure you understand the extent of expenses included with the lease. For instance, are cleaning services provided? Is heating and air conditioning available 24/7? Is there a limit on electricity use, and if so, how will you be charged for excess? All such terms should be spelled out in the lease, so there are no surprises down the road.
- Net lease. In a net lease, taxes, insurance and building maintenance are shared between the landlord and the tenants in one of three ways. With a single net lease, you will pay monthly rent as well as the property taxes, while the landlord pays the rest. With a double net lease, you will pay for insurance along with the taxes and rent. With a triple net lease, you will pay for taxes, insurance and building maintenance costs in addition to the base rent. If you share the building with other tenants, the expenses you assume are pro-rated based on your share of the building’s square footage.
- Modified gross lease. This type of lease is a cross between a net lease and a gross lease. Usually, you will have a gross lease but will be responsible for certain agreed-upon expenses, such as cleaning services, electricity or minor repairs. The landlord will assume payment for the rest.
Before renting office space for a small business and signing a lease, be sure you understand the type of lease, who will pay for what, and the potential extent of the costs you agree to assume. Ask to see examples of the expenses you will be expected to pay and negotiate caps to minimize unexpected expenditures.
Buy Georgia Realty – Atlanta Communities can help you find a small business space for rent and work through the complexities of a lease. Also, keep in mind that the landlord normally pays the broker’s commission. This means that there is no cost to you, and your agent has your best interest at hand.
A commercial lease is a legal, binding document. By having us as your agent we will help you understand the terms and evaluate them carefully. The conversation between you and your agent will prepare an agreement that not only meets your office space needs but protects your business interests over time.