Behind the scenes: The ins and outs of the commercial leasing process
Moving is never easy.
The process of finding your next retail or commercial space is full of unknowns for many business owners. How much space do I need? How long will the leasing process take? How do I know I’m making the best investment for my team?
Finding your next space is never as simple as finding a building and moving your team in. Don’t panic – at Copaken Brooks that’s what we do – and we’re here to help. Let’s walk through the leasing process together, starting from the beginning.
LOCATING THE BEST PROPERTY LISTINGS
So, you’ve decided it’s time to move. Either your company has outgrown your current space, identified different needs for a leasing space, has decided to relocate or expand to a new market, or all of the above… congratulations! But where do you start? Sometimes finding available properties can be the most challenging part of moving your business. And that problem becomes amplified if you’re making the search all on your own. Fewer properties are visible to the general public than for those working in the commercial real estate industry, thanks to industry-specific resources and subscriptions, which can be costly to an individual or single company.
As a brokerage company, we have access to the best resources and tools for searching and managing the commercial real estate landscape. One of my favorite platforms is CoStar, which helps me search for available properties and subscribe to email lists from other brokers within the Kansas City brokerage community. This feeds me information and ads for available leasing spaces across the city.
After you’ve found a space, it’s important to note how the location could impact future growth or business activities. Is there a big, new sports field going in two blocks down the street or is there going to be a major construction project on that road over the next 12 months? As brokers, we work to be in tune with the market and can help you better understand how your future neighborhood might change in the coming years. I’m often having conversations with cities or chambers of commerce to know what’s coming and evaluating demographics, traffic counts and visibility for a particular site, and then relaying those updates back to my clients.
CALCULATING A SPACE’S WORTH
Once you’ve located potential properties that fit your criteria, it’s important to factor in whether you’re getting the best bang for your buck. Prices in the Kansas City area are typically quoted as the annual dollar amount per square-foot, so monthly rent is calculated by multiplying the total square footage and dividing by 12. See the example below:
- Identify your price per square foot
- Then multiply that by the total square footage
- Divide by 12 to calculate your monthly rent
($15 per square foot x 2,200 total square feet)/12 = $2,750 monthly rent.
Of course, as a tenant, your real interest is in knowing what your “all-in” cost will be, which isn’t always going to be clear from that initial number. If you’re not careful, a property could end up costing you more than anticipated. It’s important to understand the type of lease your property requires in order to determine your “all-in” cost. There are multiple types of leases: single net, double net, triple net, full-service and modified gross. It’s important to know which one of these you would be entering into when choosing a leasing space. A triple net lease for example will require a tenant to pay for their base rent plus additional fees for the shared common areas, maintenance, insurance, taxes and utilities. You will also see properties that are quoted as “full service,” which either means all costs are included in the base fee, or it uses a modified gross basis which means the cost includes everything except for utilities. A commercial real estate broker can help shed some light on which lease each property requires, and which is best for your business.
THE FINAL STEPS
The back-and-forth of the workplace environment and rise of online retail due to COVID-19 may have you questioning if the space you’ve chosen is necessary right now. With Copaken Brooks’ expertise, our brokers can share industry best practices to make your decision-making process easier. We can also outline terms that we know to be successful within certain situations and negotiate on your behalf to find the best deal. For example, many of our clients today are looking at adding a built-in option for expansion over time, so they pay more as they scale and grow, versus having to pay for a larger space than they need today.
From what I’ve seen over the course of my career, the average business owner doesn’t always know what to ask for as they consider signing a lease, and making the deal is a detailed process. It can become overwhelming to negotiate a commercial lease for the first time. They’re regularly 30, 40, and even 50-page documents and they are typically written by the landlord, which means the lease likely leans in their favor. Consider having an attorney and your broker review it for advice on industry standards and to catch strong language that you should consider pushing back on.
Navigating the commercial leasing world can be stressful. What may seem like a minor detail could end up costing your business big time. Contact us today to skip the headache and utilize the knowledge and expertise of our brokers here at Copaken Brooks.