An introduction to commercial lease spaces
Commercial property can be any land, building or facility that can be used for business activities. In most cases, it’s separate from residential properties and may have further restrictions on the types of businesses that can be conducted there. Commercial property usually consists of office buildings, malls, hotels, business centers, retail stores, warehouses, garages, farmlands and more.
The most common types of commercial real estate are:
- Office buildings: These spaces range from single-tenant properties to skyscrapers, and their main purpose is to host companies that need office space. They’re typically divided into urban office buildings, located in major cities, and suburban office buildings that are located outside city centers. They’re also classified according to their overall quality rating into classes A, B and C office buildings.
- Retail and restaurant facilities: These include the properties where restaurants and retailers operate. They range in size and structure from small single-use buildings to large retail centers and malls.
- Industrial facilities:These types of facilities are usually grouped into industrial parks and located outside city centers and near major transportation routes. Depending on the industry type, they range from heavy manufacturing buildings to light assembly buildings. Warehouses and other types of large storage spaces also count as industrial real estate.
- Multifamily buildings: This sector includes all types of residential buildings that host multiple families. Similarly to office buildings, multifamily properties are ranked according to their overall quality into classes A, B and C.
- Land: This includes all commercial properties on undeveloped land or land that has been developed in the past but is now vacant.
Characteristics to consider
While the exact characteristics you need in a commercial lease space can vary depending on the nature of your business, there are some universal factors that you need to consider:
- Accessibility: Easy access to the location is especially important for businesses that rely on visits from customers, but employee accessibility also matters. Factors such as local infrastructure and adequate parking space are crucial for a commercial space.
- Target audience: A commercial lease space needs to be reasonably close to the target audience of the business that operates at that location. This is especially valid for retail businesses and restaurants, as they need to be located near potential customers. The types of products you sell and the price range can also affect the location. A high-end boutique in a low-income area likely won’t do well because people who live and work nearby may not be able to afford it.
- Space: Commercial spaces need to be sufficiently large to accommodate both customers and employees. They can greatly vary in size, from a small booth to large, open-space buildings.
- Zoning: Areas that are zoned for commercial use may have certain restrictions regarding the types of businesses that can operate in that particular zone, such as retail, light industrial or agricultural. There are, however, mixed-use zones that can accommodate multiple business types.
Assess your needs
Before you start your search, determine exactly what you need. This helps you narrow down the search to properties that will work.
Size is one of the most important factors. A general guide is about 150 to 250 square feetper employee. You can get away with 80 to 150 square feet if you have smaller workstations. If you have 10 employees, an average space that might work is 1,500 to 2,500 square feet. Plan for the future if you think you’ll expand your workforce. You’ll quickly outgrow your space if your business booms and you don’t have extra room.
Type of space
Next, consider the type of space you need. This might include:
- Office space
- Conference rooms
- Food prep areas
- Warehouse space
- Manufacturing or industrial space
- Shipping area
- Retail space
The type of business you run impacts what type of space you need. Consider the normal activities your employees do and what kind of space they need to do it.
Commercial spaces can vary in the amenities and features they offer. Some are very basic while others are loaded with perks. Here are some amenities to consider:
- Loading docks
- On-site security
- Fitness center
- Breakroom or dining facilities
- Building receptionist
- Outdoor areas
- On-site parking
Decide which amenities you must have for your property and amenities that would be nice but aren’t deal breakers. You’ll likely need to balance your budget with the amenities available. That may mean giving up some amenities to keep the commercial space affordable.
Set a budget
Another key factor is your budget. If you can’t afford your business property rent, your business may not survive. Be realistic about how much you can pay for your lease each month.
Remember that the lease amount isn’t the only cost associated with renting commercial properties. Account for these expenses as well:
- Furnishings and equipment
- Maintenance fees for shared spaces
- Construction costs if you change the property
- Moving expenses
Before signing the lease, ensure you understand what’s included in the lease payment and any extra amounts you have to pay.
Ways to find a business lease space
Figuring out how to find commercial property for rent can seem overwhelming. There are several ways to find a commercial space to lease. Here are some ideas.
Use a commercial real estate agent
When you hire a commercial real estate agent, you get someone who’s watching for new properties for you. This saves time so you don’t have to search for new properties constantly. Your agent understands the local market and helps you find properties that fit your needs. They might also hear about new properties before they’re listed, which can help you snag the perfect place.
Networking with your current business circle can help you find business property rental options. Fellow business owners might know of space in their building that’s available. They can also give you the name of their landlord or property management company. Even if there’s nothing available near them, the company might have other commercial property for lease that works for you.
Looking online can help you do a prescreening when you want to rent business property. You can get a visual on the inside of the business lease space to see if it’ll work for your company. If you like what you see online, you can schedule a viewing.
Target your ideal area
If you already know where you want your business to be located, scope out the area. Driving around the ideal neighborhood helps you see what kind of business lease space is available. Look for signs on buildings that show availability. Even if the building doesn’t have a sign posted, find out who owns it and contact them about a lease. They might have an upcoming vacancy that fits your needs.
Three things to look for
While the exact commercial lease space requirements and expectations can vary greatly depending on the size of your company and the industry it operates in, here are some universal things that everyone who wishes to rent commercial space should look for:
- Location: The location needs to be easily accessible for both employees and customers, but it should also be located in an area as safe as possible. Your company’s headquarters are a major part of your professional image, so a good location can improve your reputation even if your business doesn’t require direct customer interaction.
- Landlord: Your relationship with the landlord or the company that manages the property can have significant long-term effects. Landlords are responsible for setting the lease terms, which may imply future rent increases, so it’s best to research your potential landlord and make sure they have a good history with past tenants.
- Nearby businesses: Research the businesses around the area before choosing a commercial lease space, and observe how they impact the community. Having a major store nearby can attract traffic in that area, while an established business selling similar products or services to yours may affect your operations.
Commercial leasing FAQs
Here are a couple of the most commonly asked questions regarding commercial lease space:
What are the types of commercial leases?
There are two major ways to lease a commercial space:
- Lease: This is the process of dealing directly with the space owner or the person hired to represent the space owner. This implies you signing a direct agreement and having your name on the lease.
- Sublease:Some businesses or individuals already have a lease with a landlord but decide to rent out a part of the leased space to a third party. Subleasing is usually regulated by state laws and may be prohibited by the original lease agreement. Depending on the circumstances, subleasing may be a good solution for your real estate needs.
What types of lease agreements are commonly used for commercial properties?
The four most commonly used commercial lease agreements are:
- Full-service lease:In a full-service lease, the rent includes all costs.
- Net lease: Aside from the rent, you’ll have to pay some of the building’s property taxes, and some net leases also include insurance costs and common area maintenance costs.
- Modified gross lease: You will pay a fixed amount on top of the rent that covers all additional costs.
- Percentage lease: This involves you paying a base rent amount each month plus a negotiated percentage of the gross sales generated in that location that exceeds a certain predetermined number.
What does a commercial lease include?
The terms of a commercial lease can vary significantly. The type of lease determines what’s included in the lease amount and any additional fees you have to pay. Your commercial lease might include the use of furniture and equipment that’s already in the space. The lease also defines your responsibilities and any restrictions on what you can do with the property.
Can you end a commercial lease early?
Your lease is a legally binding contract, which means you’re obligated to meet all of the terms, including the lease length. You can’t break the lease beforehand unless your landlord agrees to an early end. Your lease may have the option to end it early, but it might include early termination fees. Look for clauses that let you end the lease early. You might also have the option to sublet the space to someone else.