Taking on a commercial lease is a daunting prospect. There are so many factors to consider – legal, financial, structural – and so much small print that no matter how careful and meticulous you think you are, you risk missing something important.
Commercial rents tend to be calculated on a price per square foot basis. Many office buildings are divided up, and you may want to be able to negotiate a smaller initial space and expand further as you grow. Don’t forget, since the pandemic many businesses have either closed or downsized their commercial offices after introducing a post pandemic hybrid way of working. This means that there is a significant amount of empty office space waiting for new tenants. You are in a position of power, so make sure that you negotiate accordingly.
Other areas of leasing or renting office space that you need to be aware of include:
Employ the services of a professional
As mentioned earlier, the world of commercial property is complex on many levels and is prone to an ever changing landscape. Using a professional agent or lawyer who understands this world will save you thousands in terms of wasted time on the wrong properties, and highlighting hidden clauses that might have tripped you up further down the line.
Get your security in place over and above what is advised
Before you even sign the lease, invite a security firm in the give you a detailed overview of the site and what needs to be done to keep it safe and secure. Make sure you cover all aspects of security – points of access, signage, lighting, keyholding, alarm response, patrols. This can be used when the time is right in negotiating your insurance premiums.
Don’t just leave the legal stuff up to the lawyer
Get into the habit of checking and double-checking everything yourself as well as your commercial lawyer to ensure you build your knowledge and be in a better position to negotiate. When it comes to the terms of the lease, is there a clause for early termination (on both sides), a right of assignment, or a right to sublet. Is there a renewal option, are the incentives on offer really of benefit to you, or just be a sting in the tail at a later stage? Are all costs and charges highlighted and transparent? – you don’t want to be hit with any additional costs out of the blue.
What responsibilities does your landlord hold? Do they have a good local reputation? Do they work uniquely through agents or are they more hands on? Who is responsible for the maintenance? Will you need to hire a property manager? What condition is the property in? Are you able to negotiate in any changes and/or improvements prior to moving in as part of the overall package?
Is there a ‘permitted use’ clause. Consider it in view of your long-term plans. Should you need to pivot the business will this still be covered by the permitted use.
Are there enough parking spaces? Are they allocated spaces, or a free for all shared with other businesses in the area? Is there an option to ‘buy in’ more parking spaces as the business grows?
What are the local business rates? Have you negotiated in a 5% cap on future rental increases? Are there any maintenance fees to pay?
Your individual business circumstances will throw up a raft of different questions you will need to ask, but this guide should help you start to think in the right direction in terms of the type of questions you need to ask.