Leasing Industrial Property: a Guide for Business Owners

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One of a business owner’s biggest decisions is where to run a company. Business owners must consider rent, location, property size and type required for their operations. This article outlines the types of commercial and industrial property leases, things to consider when choosing a lease, and how to select a property that can help your business succeed.

 
Related: How to Grow Your Business

 

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Lease the best property for your business

When leasing industrial or commercial properties, it’s important to ensure that spaces are suitable for your business. You’ll need to consider rent costs, lease terms and conditions.
 
Here are some steps which can help you secure the best deal for your business:
 

  • Determine your budget
  • Estimate needed space
  • Ensure accessibility
  • Use a broker
  • Make it convenient

 

Determine your budget

Consider your budget and which type of lease will best serve your needs. Determine how much you can afford, ideal payment terms and whether fixed or fluctuating fees will suit you best.

 

Estimate needed space

Estimate the space needed for your business now and in the future. Ideally, you should choose a space that helps your business grow.

 

Ensure accessibility

Ensure the property meets guidelines established by the Americans with Disabilities Act (ADA). If you find a space that isn’t accessible, calculate and consider costs for upgrading the building.

 

Use a broker

Brokers can help you find properties and negotiate lease terms. They offer extensive knowledge of financing options and market pricing.

 

Make it convenient

Choose a convenient and attractive location. If your business is dependent on walk-in customers, look for a location that can increase sales. For example, if your ideal customer ranges between the ages of 18 to 21, find a location near a university. If you’re looking for office space, choose a location that’s convenient for your employees and attractive to new talent.

 
Read more: How to Hire Your First Employee

 

Types of commercial and industrial leases

Generally, there are three types of leases for commercial and industrial purposes:

 

Full-service

The full-service lease is the most popular because it offers many benefits to the renter. With this lease, the landlord of the property is responsible for the building’s property taxes, insurance, utilities, custodian services, repairs and maintenance.

 

Net

With a net lease, the rent is often lower, but renters are responsible for additional property costs. With a single net lease, for example, they pay a share of the building’s property taxes. A double net lease requires that they pay a share of property taxes and insurance. And a triple net lease requires a share of the property taxes, insurance and common area maintenance items (CAMS). Restaurants and retail businesses typically sign a triple net lease.

 

Modified gross

A modified gross lease has components of full-service and net leases. With a modified gross lease, the renter pays a fixed fee for building expenses. This is beneficial to businesses because there are no unexpected costs and rent is also fixed. With a modified gross lease, the landlord will cover utility and custodian services.

 

A last note on leasing

Once you find spaces that work for your business, determine if lease terms are negotiable. You may be able to negotiate rent, length of the lease, security deposits, renewal options and increases.
 
Before signing a lease, make sure expenses are documented and agreed upon so you are able to budget accurately.

 

Leasing FAQs

Here are some frequently asked questions about commercial leasing:

 

What are the different types of commercial property zoning?

There are four commercial zoning types: leisure, retail/restaurant, office and industrial. Each governs the type of building operations that are allowed. Learn about your local zoning laws to ensure your business operates in the correct zone.

 

What are some common limitations of commercial leases?

Many leases prohibit renters from altering parts of a space or building:
 

    • Advertising and appearance: There may be restrictions on changing the appearance of a business or adding types of advertising signage – for example, in terms of size and colors allowed.

 

    • Contractors and services: Leases may require that renters honor existing agreements with contractors for services such as renovations, repairs and utilities. Before signing any lease, it’s a good idea to learn about the reputation of the service provider and potential costs.

 

  • Traffic and parking: Properties may restrict the number of parking spaces for customers or employees.

 

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