Leasing Commercial Real Estate Steps - Analyze, Inspect, and Secure!

FinanceLoans / Lease

  • Author Chris Hunter
  • Published July 20, 2011
  • Word count 608

Leasing commercial office space is a common issue to which many business owners devote much thought. Success or failure in this decision relies on one’s ability to select and then negotiate for commercial real estate that is best suited to a business. After selecting the right location for the company and making the final rental decision, the next phase is the leasing process that will involve formulating significant portions of the lease agreement. The following is this process from start to finish.

Step 1: Analyze the Lease Requirements and Needs

The rapidly changing business world believes that the words ‘growth’ and ‘risk’ are interchangeable. When securing commercial property for a business operation, it is both exciting and frightening. A company undoubtedly aims for success but may encounter several hazards along the way. This is common in running any type of operation, so an owner must stay focused and concentrate on fulfilling all basic goals.

Basic Goals in Acquiring New Property:

• Growth - The new location should provide room for business growth and expansion.

• Transferable - The agreement should be transferable without penalty.

• ROI - The new location should deliver a high return on investment during the entire length of the contract.

• Increase Profits - The new location should help increase cash flow to counterbalance the cost of relocation and still allow for a positive net income for the company.

Terms of Lease

To avoid future complications, it is important that a business owner understand and analyze the terms of the office lease. Both tenant and landlord should know the obligations, terms, and conditions relevant to the property rental.

The terms of the lease should clearly outline the following:

• Length of Contract – Clearly state when it begins and ends.

• Monthly Payment – Declare any escalation of the monthly rent.

• Annual Lease Amount - Outline the total rent paid in a year.

• Category of the Lease – State specifically whether net or gross category.

• Clauses - As applicable for both tenant and landlord.

• Renewal - The right to renewal of the agreement, usually by both parties.

• Obligations of Both Parties – Specific declaration of who is responsible for what office items, such as renovations, repairs and maintenance.

• Security Deposit – How much of a deposit is required as well as any conditions for its return to the tenant upon satisfactory completion of the contract.

• Rights to Termination – Defines how both sides may terminate the contract.

• Taxes – Itemization of which party is obligated for assessed property taxes.

Working Space Requirements:

• Utility and amenity services

• Furniture and equipment

• Physical dimensions

• Proper lighting

• Dividers for office cubicles

Step 2: Inspect the Premises

After determining the basic company requirements, it is important to visit the various properties available for rent for space planning and general comparison purposes. Ensure that the new location will satisfy the needs of the company.

Step 3: Secure Necessary Documents

Once a decision has been made as to which property to lease, the final documents must be drawn up to process the lease agreement. The documents needed are:

• Letter of Intent

• Offer and Acceptance Agreement

• Lease Agreement

• Fit-out Period

All documents should be prepared ahead of time so that either party can have the paperwork reviewed by a real estate broker or attorney if necessary.

The commercial lease process can be lengthy; with the proper guidance, it can be headache-free and a successful outcome for both the landlord and tenant. For those interested in the final steps of ‘Advice, Negotiate, Forms and Handover,’ that portion will be covered in another article. The first steps listed here to analyze, inspect and secure will hopefully head any business to securing the best commercial office lease for their company!

C. Michael Hunter is an expert in commercial real estate and office space information. To find out more about Dallas Office Lease, go to the main website at: http://www.lcrgusa.com/.

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