Finding the right commercial property for your business can be complicated if you don't know what you're looking for or what factors to consider. After all, it will serve as your base of operations, so it has to accommodate your business needs.
While it's not as significant as buying commercial property, commercial leasing can often last between three and 10 years. That leaves you stuck in a space that could impede future growth plans. With that said, what should you look for before renting commercial real estate?
Key Highlights:
- Identify the right property type, layout, zoning compliance, and space capacity to ensure the commercial space supports daily operations and future staffing needs.
- Prioritize customer accessibility, foot traffic, parking, nearby amenities, employee commute options, and room for future expansion.
- Look beyond base rent and account for operating expenses, renovations, and rent increases to avoid straining your cash flow.
- Understand lease duration, responsibilities, and the differences between net, gross, and percentage leases before committing to a long-term lease.
- Verify building systems, safety compliance, and structural integrity to prevent costly repairs and operational disruptions.
Knowing What Your Business Needs
You can start by clearly outlining what your business requires from a space. The type of commercial property also matters greatly. Does it suit industrial use? Will local zoning regulations keep you from conducting business?
Even the layout can influence how your business runs. An open floor plan would better suit a retail business, as customers can see all your products, whereas a property with rooms would allow you to have private offices. You should also consider the number of employees your business may have.
If you're unfamiliar with the legal considerations concerning zoning laws, a commercial real estate broker can provide valuable insights so you can make an informed decision. If you want to find the perfect commercial property for your business, don't hesitate to ask experts in the field.
Evaluating the Commercial Space Location
Since location affects customers' access, employee convenience, and brand perception, careful consideration is recommended. When it comes to hospitality and retail locations, choosing the right commercial property can be the difference between profitability and failure.
- Customer Accessibility: Visibility and high foot traffic are crucial in many businesses, which means urban areas are typically the prime locations for various business types. Parking availability should also be considered if your target market is intended to stay for shopping or dining.
- Nearby Amenities: Depending on your business needs, proximity to suppliers can reduce logistics costs and streamline business operations.
- Workforce Convenience: It's not just about having more customers with good foot traffic. You should also consider how your employees would get to work, such as by public transportation or on major roads.
- Space for Future Expansion: If you have planned developments, such as infrastructure projects, you also need to account for available commercial space. It might be the correct location now, but it won't be if there's no room for future growth.
Understanding the Cost of Renting
Renting commercial real estate won't be cheap, which means you need to carefully calculate the costs for all your options during your property search. You need to account for expenses like:
- Base Rent
- Operating Expenses (Utilities, Maintenance Fees, Property Taxes, etc.)
- Renovations
- Rent Increases
If it's the right commercial space for you, it will be for many business owners as well. With high market demand, you can expect higher costs. You need to determine whether your cash flow can sustain all expenses without financial strain, leaving very little room for business growth.
Reviewing the Lease Terms
Ensuring that you get favorable lease terms saves you from headaches in the long run. You can consult a commercial real estate broker with market knowledge to help you choose the right commercial property for your business.
The lease terms will outline matters such as monthly rent, lease duration, maintenance responsibilities, required permits and zoning regulations, and more. There are three commercial lease types a landlord can offer you, which are:
- Net Leases: This type of lease is the most common in commercial properties, where the tenant covers utilities, real estate taxes, insurance, operating expenses, and other property-related expenses.
- Gross Leases: With a gross lease, the tenant can pay a lump sum to the landlord, and the property owner uses it to cover the building's operating expenses.
- Percentage Leases: Typically used in retail businesses, tenants pay a base rent and a percentage of their monthly or annual revenue. With the share in profits, base rents are usually lower. The arrangement will ultimately depend on the terms both the landlord and the tenant agree to.
Conducting a Thorough Property Inspection
It's not the right property unless you are 100% sure that there won't be any issues to encounter once you've signed a lease. Skipping inspections can be the most costly mistake you'll make. For a thorough inspection, it's best to hire a professional. They will check things like:
- Building Systems: Ensure HVAC, plumbing, and electrical systems are in good working order. Updating them can be very expensive, and you'll be better off opting for properties with working systems.
- Safety Compliance: Check the fire exits, sprinklers, and ADA requirements. In some cases, environmental hazards can also disrupt your business.
- Structural Condition: Inspect the roof, walls, flooring, and foundation of the property, as these can become safety risks for you, your employees, or your customers.
FAQs: Choosing the Right Commercial Property
What factors should I consider before renting a commercial space?
- The most important ones are whether they have what your business needs, such as individual rooms in an office space. Location, rental costs, lease terms, property condition, and zoning laws are also essential factors.
Is it advisable to rent older buildings for business?
- That depends on the condition of the building. While older commercial real estate properties might come with issues like wear and tear, some are well-maintained and are just as good as new properties.
How long do commercial lease terms last?
- They usually range from 3 to 10 years, so you have to consider your options carefully, including the level of long-term commitment.
Work with Someone You Can Trust
During your tenancy, you will constantly have to communicate with the landlord or property manager, so make sure that you engage in business with someone reliable. With commercial rental properties under Blue Line Property Management, you can expect quick, transparent communication.
Find the perfect commercial property for your business. Contact us today!
