10 Things to Consider BEFORE Signing a Commercial Lease

10 Things to Consider BEFORE Signing a Commercial Lease

Signing a commercial lease is a huge commitment. So before doing so, it is important to think “what should I look for when leasing a commercial property”. There are many different things you should consider before signing a lease, like the rules that need to be followed, if you really need a commercial space in the first place, and if you would be able to modify the interior/exterior at all.

  1. The Right Space/Location

Finding the correct commercial space for you and your business is a very detailed process. Don’t rush into anything that you’re not 100% certain you want. This can be a very stressful task, so be patient and look for details you have determined to be priorities when leasing. Also, make sure the location of this property is a good fit as well. The location can play a vital role in your business as well. If you find a property that you love, do not sign the lease yet. Ask the landlord if you can take a day to think about the things you should consider before signing a lease.

  1. The “Length” or “Term” of the Lease

This is the amount of time that you will be allowed to occupy the property. This is also how long you are (legally) obligated to pay rent. Many residential leases are only for a year, but commercial leases are typically set on a multiyear basis.

  1. The Rent/Staying Within Budget

The lease agreement should state how much the rent will be. It should also clearly state when and how much the rent will increase. For example, it might say something along the lines of, “your rent will increase once a year by 10%”. Before looking at properties you should have thought about what you can afford and what you can’t. Make sure the rent (and all other expenses that come with leasing a commercial property) are within your budget. If you can’t afford it, don’t lease it.

  1. Adding On

If you think you will ever need to expand your office space then you need to make sure that is something stated in your lease agreement. Look at what type of alterations are allowed/prohibited and who would have to cover the cost of those additions.

  1. Negotiate Well

It is wise to not accept the landlord’s first offer when leasing a commercial property. If they won’t negotiate the price, try to get other things included for that same price. Even if you are in love with a property, tell yourself you would be willing to walk away. If the landlord knows you are willing to walk away, then you have more leverage in the negotiation process.

  1. Understand the Agreement

If you don’t fully understand the lease agreement, you could be signing something that is entirely in favor of the landlord. Be sure to keep an eye on the detail and it is even a good idea to go through the lease clause by clause. It could even be beneficial to review it with an attorney just to be sure you didn’t overlook anything. Also, they could know more about what to look for in a lease before signing. Lastly, be sure anything discussed and agreed upon verbally is in the lease.

  1. Be Prepared

Look at as many different properties as you can. This will help you get a better understanding of what you are wanting and what kind of lease agreements are out there. Be as open minded as you can about location, but also don’t lease anything in a location that would hurt your business. If a property is not in a location you’ve looked at previously, that is not a bad thing…there could be better leasing options.

  1. Exclusivity

If you are looking at a commercial lease with multiple office spaces, be sure you get exclusivity for your building. This means that if you own a design company and have a lease at this property, no other design companies would be able to have a lease in that office space. You don’t want your competitors to be in the same building/space as you, that could cause issues for you and your business.

  1. Insurance

Most of the time, the insurance provided by the property does not include your business equipment, such as computers, furniture, or any other personal belongings. Although, your lease may require you to have some sort of insurance

  1. Exit Plan

Having an exit strategy prepared is a good idea as well. Be sure to know what the penalty for breaking a lease would be and that the lease states that clearly. Usually there is some sort of “punishment” for breaking a lease, just be sure you know what that “punishment” is.

Just remember, think “what should I look for when leasing a commercial property”, read everything carefully, and take your time. Do not rush this process.