Every entrepreneur dreams of having a successful and growing business. And when the time comes that your business scales, it’s essential to lease an office or storefront. But, signing up for a lease is not as easy as counting 1-2-3. There are several factors you need to keep in mind such as location, budget, terms, and contract obligations to secure the best deal possible.
A lease is a legally binding agreement between you and the landlord. The process should be deeply analyzed to avoid future problems that might lead to legal implications. From the length of occupancy to the fine print of the contract, remember that a lease is more than just negotiating low prices. You need to study the market carefully, understand the basics of renting a commercial space and be in the position of strength to secure your rights as the tenant. Here’s what you need to know before signing a lease contract agreement.
1. Choose the best location
Location, location, and location – it’s still important in today’s highly technological world. It’s the heart and soul of your trade and the life of your business. Depending on your industry, choose a commercial space with high foot traffic. Near schools, major establishments, government spaces, shopping malls, or crowded residential areas.
Your location should be accessible for all including yourself, your team members, and to the customers who will visit your shop or office. Is it near public transport? Is it easy to find? What are the major landmarks near the area? Are there financial institutions such as banks within the vicinity? Is the commercial space accessible through a major road or is it hidden within back streets?
- Check the public amenities near your business such as bus stops or train stations.
- Review the establishments within the area that might affect your business.
- An area that is highly populated might give you a chance to hire potential talents.
2. Determine your budget
It is no hidden fact that leasing space is expensive. Before you even begin looking for the perfect location, make sure to set a realistic budget and stick with it. You might have the most perfect shop or office but, if you’re down in debt, your business will suffer. Crunch the numbers and set a working budget with minimum and maximum allocations.
Rent is just a small part of your overall lease expenses. Keep in mind that there is still a whole lot to consider such as renovations, local permits, sanitation, Business insurance, new equipment, furniture, utilities, and much more. When looking for a space to rent, be specific on what is included. Does it come with an internet connection? How about a water bill?
- Include extra expenses on your budget such as cleaning and maintenance.
- Plan carefully, too many expenses will stunt the growth of your business.
- Lease the essential, don’t rent more space than what you really need.
3. Consider the length of the lease
Another factor you need to consider before signing a lease is the length of occupancy. Will you go short-term or long-term? If you’re a small startup company, the future of your business is probably unclear. Next year might be good but two or three years after, will your business still thriving? What if you don’t have the financial capability to continue renting in the next few years? What are your available options?
Committing to a 5-year lease is great if you have financial means to pay the rent but for growing businesses, but getting a short term lease is much more feasible – and safer. You don’t want to be stuck in a long-term commitment because your business’s future is uncertain. There is a possibility for you to outgrow the space, dive into another industry, or feel like the community isn’t giving you the room to expand.
- Consider co-working spaces if you are not comfortable with a long-term lease.
- Or the option to extend the lease for a stated number of years at the same rate.
- Know your provisions for an early exit such as incurred fees, extra charges, and penalties.
4. Don’t be afraid to add revisions
There’s more to leasing a commercial space than paying your monthly rent. You should equally factor in revisions such as re-building an existing space or renovating an area. When added up these might leave your money on the table. Always determine the condition of the space before signing a lease. Things like repainting, moving doors, rearranging partitions, adding extra rooms, etc. And who will pay for these improvements?
Likewise, you should pay extra attention to expansion, cancellation, and space reduction options. Your lease should be as flexible as possible, both for you and to the landlord. Don’t be afraid to ask and include revisions within your contract, that should be agreed to by both parties. Some revisions to ask about include but are not limited to:
- Ask your landlord about the option to sub-lease or rent the property to someone else.
- After a specific rental period, ask for the option to purchase or buy-out the property.
- Ask for protection against occurrences like a service interruption or building condemnation.
5. Consider working with a broker
Leasing an office or shop space can be an overwhelming and difficult experience. From finding the right location to dealing with legal complexities, newbies might find it hard and inconvenient. If you don’t want to deal with the burden, consider working with a qualified professional to help you out – a real estate agent or broker. They can help you find your target market and simplify the whole renting process.
Working with a broker is a no-risk, high reward solution. Most will accept the job without you even spending a dime. Find a broker that receives a basic salary, so you know they won’t rush your lease just to get a commission. Screen the list of possible candidates and consider those that make your interest a top priority. Brokers will:
Do all the legwork for you, from location to paperwork. Negotiate on your behalf and find the best possible option. Help in terms of property location, pricing, and lease technicalities.