Leasing a commercial real estate can be a confusing issue for most entrepreneurs and small business owners. The professional real estate agents often add to this confusion by being diplomatic for their own vested interests.
Commercial real estate investments involve a lot of money, and an imprudent move can result in a huge loss for the owner. Nowadays, most of the new commercial real estate businesses are started by leasing office space, as it provides a cheaper alternative to purchasing a new space. Here are some tips on how to lease commercial real estate.
Develop a Proper Network
Having a proper network of experienced real estate brokers, solicitors, contractors and investors is necessary to find the best deal. It is always good to check out references and arrange meetings with such qualified people, in order to find and execute profitable deals.
One can also take the help of local professionals, who in turn can provide useful leads and contacts. It is advisable to read local newspapers and the city newsletters, to understand the various aspects of the real estate market. The knowledge of the current real estate statistics are helpful for the owners to come up with a profitable and feasible lease rent.
Find a Reliable Tenant
It is always important to look out for tenants who have a good reputation in business. In case some damage occurs to the property, the owner has to get it fixed, and he/she may have to pay out quite a bit to ensure that it remains in good condition. Tenants that pay late, break contracts, or mishandle the property, can become very problematic at times. Therefore it is advisable for the owner to be a part of the business, and get involved with his clients and the building. The investment and the profits borne would collapse, if the owner becomes casual about it.
Negotiate for a Profitable Deal
The owner should always keep in mind that the fees money, including the brokerage commission, and the fees charged by accountants, attorneys and engineers, are all negotiable. He should never hesitate to ask for a lower price, as most of the service providers reduce their fees in order to guarantee ongoing future business.
As large amounts of money are involved in commercial real estate transactions, the deals can be easily negotiated. The basic concept of a successful negotiation is the knowledge and empathy of each party, with regard to the major issues faced by the other. A balanced perspective is often helpful for a deal, which is good for both the landlord as well as the tenant.
Study the Assignment Clauses in the Lease Agreement
With the increase in number of fraud cases in real estate deals, the owner should be careful while reading the terms and conditions of the lease agreement. Any doubts should be immediately cleared out with the real estate agent and the tenant.
Annual Increase in the Rent
There is normally a change in the rent of a property, as a fixed rent over longer-term leases are rare. Some landlords opt for an annual increase in the rent, which is based on the percentage increase in the Consumer Price Index (CPI). In some commercial property leases, the increase in the property rent is capped at a fixed percentage annually (say 2% or 3%).
It is good to give oneself some time for the research, in order to avoid a bad investment. There is of course no sure shot way to make a wise investment, but the awareness of market conditions and one’s own finances, can definiately help the owner to come up with a profitable lease for his commercial real estate.