FINDING A COMPANY HOME
You need to find some commercial real estate, and need it soon. You’ve
outgrown your current space and it’s starting to hurt your productivity. What should you be looking for? What are the pitfalls?
Begin your search for commercial space early. In fact, you should always be on the lookout for a better space. When you are about a year
from having to move, it’s time to get serious and contact your commercial real estate agent. Whether buying or leasing your next space,
it can take a long time for everything to work out. If you want to buy
your space or building, it can be a very long process. Appraisals for
commercial property regularly take twice as long as for residential
property. It may take much longer to close. A commercial lease is also
not a simple affair, they often are 10-13 pages long. There are many
points of negotiation that can work to your advantage or disadvantage.
Changes in use of an existing building often necessitates use permits
or variances from local planning and zoning authorities. This can be a
long, seemingly interminable process.
When evaluating any new space, there are a number of questions about
suitability to ask: Is the space large enough? Does it have enough
room to accommodate the business you hope to be doing in a few years?
Is the construction in good shape? Is it fire-proof? Is there adequate plumbing and wiring? Are the windows suitable for displaying
your merchandise? What are the sign regulations? Are there adequate
storage and receiving facilities? What is the traffic, and the traffic’s willingness to stop?
The Lease
Before you sign any lease, make sure you KNOW:
* as much as possible about the property, and have thoroughly exmined it for suitability.
* the duration of the lease, the amount of rent, and the date it’s
due.
* what the lessor will do to make your space usable, and what you
must do yourself (carpet, fixtures, etc.)
* subleasing, subletting and assignment arrangements.
* provisions in event of fire, flooding or other natural disaster.
* mutual obligations for repair and maintenance.
* provisions for interior and exterior signage.
* rights of removal of fixtures.
* options and renewal arrangements.
Rent
The amount of the lease or rent to be paid is generally an annual sum,
payable in monthly installments. It sometimes may be set as a percentage of store sales. In any case, the entrepreneur should think of
rent as a percentage of sales. Generally, you should plan on paying
between two and 10 percent of your anticipated sales for retail businesses. Service businesses can pay more, since they have little merchandise cost.
Location
The old saying that the three most important considerations in real
estate are location, location, and location are particularly true for
commercial real estate. You need to know how much you will depend on
traffic, and whether the location will generate that. Look before you
leap, and use all the professional help you can get. Some assistance
from a knowledgeable consultant or commercial real estate broker in
the negotiations can save you thousands of dollars over the life of
your lease.
