Written by Katherine Jensen, Jensen Consulting
These past few months I’ve met with half a dozen tenants who need help out of a mess! A mess that could have easily been avoided had they equipped themselves with the proper Realtor and documentation expert from the start.
Here are some tips to keep in mind if you are thinking about Commercial space –
Don’t use a residential realtor for your Commercial space!
Usually we find comfort in choosing our friend, or friend of a friend when we are looking for referrals – and the Real Estate world lives on referrals. The downside of working with friends is it is hard to be tough on them. Could you FIRE a friend if you thought they weren’t up to the job? Sure Suzie was great at finding you your dream home and she really knows the small town you want your business to grow in….. but does she know –
a. What construction costs you are looking at to fit out your space
b. What parking or zoning requirements might be needed for your particular use
c. How much time it will realistically take you to fit out your space
d. How to calculate your GROC
e. How to calculate percentage rent
f. What types of Exclusive rights, Restrictions and first rights of refusal you would want to negotiate
g. How to calculate CAM recoveries – and know which charges to exclude!
2 – Always document your agreement
If your Landlord is not willing to write up a Lease, be proactive and present them with a document. Your Lease is one of your assets and you should be protecting it! Without a lease, there could be nothing to bind your landlord. Sure, you and your Landlord are pals today, but what if they are hit by a bus tomorrow, or a developer comes in with an offer they can’t refuse or even worse the government wants the land back! To ensure your business doesn’t suffer, and your lease term is not affected by these situations you want to have a written Lease Agreement that contemplates these scenarios.
3 – Understand your space
Usually this will mean getting the right team behind you. Most small businesses are experts in their fields – but will have little knowledge of the behind the scenes needs of their work space. For example, the baker that needs specialized HVAC system for the ovens; the Dentist that needs to core the floors for plumbing or the fashion retailer who needs accessible entrance ways. Sophisticated Landlords will require you use one of their pre-approved Interior Designers (not to be confused with decorators – these individuals and technically trained in developing practical, usable space) to draw out and design your space in the Building. Smaller Landlords might not have any requirements, and that is where independent Tenants run into issues when they don’t have the right team around them. The Tenant ends up with a space that needs significant improvements not budget for when they agreed to the rent. Now that HVAC system is going to cost an extra $60,000, or the coring will add an extra 3 weeks to the construction schedule. An expert Commercial Realtor will have a good idea about these types of requirements, and an accredited Interior designer certainly would as well.