by Phill Tomlinson | Sep 6, 2021 | Blog
A commercial lease can be an intimidating document, especially for those who don’t work with real estate regularly. Reading your entire lease carefully is vital to ensuring that you’re getting the best deal when you’re renting commercial office space; however, some terms and clauses are of particular importance and should be considered with the utmost care. These include:nn nnRent and Common Area MaintenancennThe last thing you want is to end up with is a surprise when it comes time to make your first month’s rent payment. So take the time to read the rent terms carefully. Are there any fees in addition to your rent? When is the rent due, and how must it be paid? What are the penalties for late payments? How much is the standard area maintenance, and what precisely does it cover? Consider all of this plus what isn’t included in your lease before you sign.nn nnRight of First RefusalnnWhen you find the perfect office space, you want to make sure that you have the chance to stay there when your lease is up. The right of first refusal clause says that your landlord must allow you to say that you don’t want to renew your lease before making the property available to other prospective tenants.nn nnDefinition of the PremisesnnThis part of your lease tells you precisely what you’re renting. Make sure that the entire office space’s square footage is correctly stated in the lease. If the landlord promised you the use of shared facilities, such as restrooms in a corridor, a shared reception area or a shared break room or cafeteria, these spaces should also be mentioned here. Don’t leave anything as a mere promise. Make sure it’s spelled out in writing under the definition of the premises.nn nnSubleasing and AssignmentnnIf your business needs change and you no longer need all or part of your office space, this clause gives you the ability to sublease your space or assign it to another tenant to reduce your monthly costs. However, the future is unpredictable, so it’s worth fighting to have liberal subleasing and assignment rights included in the language.nn nnUse and Exclusives ClausennDoes the lease have any stipulations on what kind of businesses can hold office space in the building? If so, is there any possibility that the defined acceptable uses may limit your future endeavors? You don’t want to find yourself unable to expand into a new field, niche, or industry due to your restrictive lease. On the flip side, is there any language protecting you from having a competitor move in across the call? Depending on your line of business, and exclusives clause may be necessary to protect your interests.nn nnMaintenance ClausennWhat happens when something goes wrong with your office space? Who is responsible for handling the maintenance cost, and who is required to make arrangements to have repairs or maintenance done? Make sure the responsibilities are clearly defined to save yourself future headaches and misunderstandings.nn nnIf you need to know more about the commercial lease agreement, or if need commercial space, contact us anytime, we’re happy to help. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.nnThank you.nn
nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!n
nn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn
by Phill Tomlinson | Sep 6, 2021 | Blog
Typically, companies start looking for new commercial real estate space as little as nine months before their existing lease ends. But, unfortunately, they’re doing it wrong. To successfully find and negotiate space, the savviest tenants can spend two to three years planning for a move. Here are some steps that can help you in getting the ideal space for your commercial real estate:nn nnStep 1: Determining Your Space’s SuitabilitynnThe first step in looking for a new space is to step back and look at your existing space. Sometimes, there’s nothing wrong with your current commercial real estate that a few nips and tucks won’t fix. However, if your existing space works and your rent is at the market, staying is usually cheaper and more accessible for your business to avoid the interruptions caused by moving.nn nnStep 2: Finding a Commercial Real Estate BrokernnIf you decide that it makes sense to look at a new space, the first step is to find someone to help you with the process. A professional tenant rep can save you time by helping with every step in the process while also delivering better results due to his high level of expertise and access to unique tools. Usually, your first step is to go back to the broker that brought you to your current space. However, the market is constantly in flux, and it’s also a good idea to reach out to other active brokers in your area. Talk to similar companies to see who they have used in the past, as well.nn nnStep 3: Researching Markets and SubmarketsnnThe site selection process can be the most time-consuming step in finding a new piece of commercial real estate to occupy unless you are sure that you want to stay in the same general area. Barring that, you will want to study demographics and economics, conduct site visits, and find the perfect place for your business. Even with a commercial real estate broker’s help, this process can easily take six months, especially when you factor in travel.nn nnStep 4: Discussing with Your Existing LandlordnnOnce you generally know what you want, it’s time to sit down with your landlord. You will probably still have 18 or so months left on your lease at this point, but it’s still a great time to have a discussion. One possibility is that your landlord might be willing to sweeten the pot to keep you. Another is that they might want to get you out sooner to accommodate another tenant. In a worst-case scenario, you waste an hour, but you still retain all of the rights you have under your lease.nn nnStep 5: Touring SpacesnnOnce you know that you’re moving, it’s time to start seriously looking at spaces. Your commercial real estate broker can help facilitate this entire process by finding potential sites and by arranging your tour. This process can usually take a few months.nn nnStep 6: Negotiating and SigningnnOnce you’ve found the perfect space and a couple of backups, it’s time to start the negotiation process. The process’ speed varies based on your market, but it’s best to earmark a couple of months so that you aren’t rushed into taking an unsuitable offer.nn nnStep 7: Building the New Space OutnnFinally, you have to wait for your space to be built out and installed in all its systems. Even simple build-outs can take 60 or more days.nn nnOptional Step: When Bad Things Happen to Good Commercial Real EstatennTo be safe, wise tenants build a few extra months into their schedule. That way, if something goes wrong, they still have some spare time.nn nnIf you have any questions on this article or need commercial space, contact us anytime, we’re happy to help. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.nnThank you.nn
nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!nnn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn nn
by Phill Tomlinson | Sep 6, 2021 | Blog
While the art of negotiation means making compromises, you want to ensure that you walk away with a commercial lease that isn’t all in your landlord’s favor. To ensure that you’re getting the best deal when leasing commercial real estate, follow these 10 tips:nn n
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- Have an expert by your side
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nA tenant rep broker can help to ensure that your interests are protected at the negotiating table. As experts in commercial real estate, brokers know the market and can help you decide when you have a fair deal. Best of all, the landlord pays a broker’s fees, so their services won’t cost you a thing.nn n
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- Think past the contract
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nWhen you’re presented with an initial contract, the landlord may tell you that it’s standard and act as if every other tenant simply signs without any discussion. Don’t be fooled by this practice. The first version of the contract will be written only with the landlord’s interest in mind. Think of it as a starting point or springboard for a negotiation.nn n
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- Calculate all of the costs
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nNever make the mistake of only calculating the cost of the rent. You’ll also need to add in the Common Area Maintenance or CAM and any other fees that are being assessed to ensure that your monthly payment fits your budget and is fair.nn n
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- Start as early as possible
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nWaiting too long to start looking for commercial office space can make it harder to negotiate a fair contract. However, when you have time on your side, the landlord won’t be able to take advantage of your sense of urgency, and you’ll have time to start your search anew if you can’t reach a fair agreement.nn n
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- Comb over the entire contract
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nRead over every line of the contract and make sure you understand all of the terms. Then, seek clarification on any confusing points before you sign.nn n
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- Prioritize your wants
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nMake a list of all of the amendments and concessions you want to add to the contract before you get back to the landlord. Then, prioritize them, deciding which ones are deal-breakers and which ones you can live without, so you’ll be able to compromise during the negotiation.nn n
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- Know the market going in
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nHaving a working knowledge of what other tenants in the area are paying and what types of contracts genuinely are the standard will have you armed and ready to prove that your requests are reasonable. If you don’t follow tip number one, make sure you do plenty of research before negotiating.nn n
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- Include your team
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nBefore you sign the contract, have members of your management, finance, legal, and operations team review it and provide feedback. You never know what fresh sets of eyes may find in the text.nn n
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- Fight for flexibility
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nWhenever possible, try to provide some way to keep your lease flexible if your needs change—for example, subletting clauses, or the right to renegotiate or end your lease early can save you from hassles in the future.nn n
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- Be willing to leave the table
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nMost importantly, be willing to walk away if your landlord won’t meet you halfway and give you the concessions at the top of your list. You’ll be better off going for your second choice property for a fairer deal than you will be settling for terms that aren’t the right fit for your business.nn nnIf you have any questions on this article or need commercial space, contact us anytime, we’re happy to help. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.nnThank you.nn
nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!nnn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn nn
by Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
Tenant Improvements refer to the customization done to a space to make it meet your needs. A tenant improvement allowance is a sum of money that your landlord makes available to help defray the cost of your build-out. In order to understand tenant improvement allowance, you also need to know the ins and outs about it.
TIs in New Space
Office space typically gets delivered in shell condition. This means that while some of the building’s common areas are completed, the interiors of the spaces are frequently bare and unfinished. This makes a great deal of sense from a developer’s perspective. After all, he doesn’t know if a tenant will want an entire floor or a portion of one, and he can’t guess how you will wish to have your space built out.
Leaving the space unfinished means that the developer doesn’t waste effort creating tenant improvements that won’t work for you. Instead, assuming space is available, you get to carve off your desired portion on the floor and design your space to suit your needs.
When you want your own office designed to match your needs with your authentic materials of choice exactly, it’s almost impossible to beat the flexibility of taking new space. Furthermore, it is frequently a less expensive option.
TIs in Existing Space
Unless you’re considering leasing office space in a completely new area, most of the space that will be available to you will have already been built out with tenant improvements for the previous occupant. However, if you have some flexibility, this can be an excellent opportunity.
The odds are that if you look at a typical pre-built space, it won’t match your needs. Even if the size and location are correct, the TIs probably won’t be. Because of this, landlords know that existing spaces typically need customization. However, if you can look through enough spaces to find one that suits your needs as-is, you could save thousands of dollars in occupancy costs. You won’t have to spend anything (much) to customize it, and the landlord won’t have to pay for demolition or customization.
On the other hand, the process could get expensive if you have to take existing space and reconfigure it. In addition to your construction costs, you will also have to figure out demolishing the previous TIs to get the space into buildable condition. As you do this, take a careful look at what you can reuse from the old space. Seemingly minor items like ceiling grids and tiles or doors can add up to multiple dollars per square foot, letting you use your TI budget more wisely.
Allowances for Tenant Improvements
Frequently, you can look to your landlord to help you get your space configured. TI allowances are standard on new space —since they’re an integral part of finishing the building—and are also readily available on already-configured spaces in many markets. The amount of the TI allowance you receive varies based on multiple factors:
First, new spaces typically get more generous subsidies than already-built ones.
Second, more landlord-favorable leases usually receive more TI money. These are leases with higher rents or longer terms.
Finally, TI allowances are usually more generous in markets with higher vacancies and fewer tenants looking.
If you can get help with tenant improvements from your landlord, read the fine print so that you understand how the allowance works. Seemingly small requirements—like having to use certain companies or certain materials—could significantly impact the value of the budget you get. As in most parts of commercial real estate, the counsel of an experienced tenant representative can frequently help you get the best deal.
If you have any questions on this article or need commercial space, contact us anytime, we’re happy to help. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Thank you.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
Phill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns.
Bookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCRE
by Prince Licaylicay | Sep 6, 2021 | All Articles, Leasing
With rents going up and interest rates continuing to post rates at or near historic lows, the balance might seem to have shifted to the latter option in the lease vs. purchase decision. However, leasing remains a strong option for many companies. Here are a few points you need to know to understand which one is best for you.
Reasons to Purchase
The purchase side of the lease vs. purchase equation usually comes into play when your company’s needs are fixed and predictable for the long term. If you know what you need now and won’t change for at least a decade or two, purchasing can be a good option. It gives you total control over your space and a great deal of certainty over what you can do with it since, after all, you own the space.
Purchasing also gives you a chance to participate in the potential appreciation of the property. Unfortunately, for many businesses and most locations, the downsides of purchasing and tying up capital are more than the benefits of the appreciation. However, if your business is one where the appreciated property can form an exit strategy or are in a position to control precious property, purchasing may be a wiser option.
The Benefits of Leasing
Many of American’s most successful companies come down on the leasing side of the purchase vs. lease decision for many reasons. First, leasing is typically more flexible, less capital intensive, and offers more options.
The flexibility benefits of leasing are straightforward. While it’s technically accurate that buildings can be sold on the market, the usual case is that finding a buyer for a vacant building can take months or years, especially at a reasonable price. With a lease, though, you can move out whenever your lease expires. If a building needs work, you can leave that work for the landlord as well. If you have your lease written with extension options, you can choose to renew it, taking flexibility away from your landlord automatically.
In summary, leasing helps to conserve capital in three ways:
- Moving into a leased property usually requires a lower initial investment than purchasing a building, simply because rent and security deposits are usually less than loan costs and down payments.
- Lease payments may be cheaper than mortgage payments.
- While the accounting of leases is shifting, leases are still treated differently than building purchases when it comes to principles of building your business’s balance sheet.
If you have any questions on this article or need commercial space, contact us anytime, we’re happy to help. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Thank you.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
Phill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns.
Bookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCRE
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