October 1, 2015
If you’re new to the commercial space rental, you may find it a bit of a challenge navigating the shores of commercial real estate. Be prepared to spend time researching, gathering information and seeking advice from industry professionals. In this prominent digital age, there is a vast wealth of knowledge and information at our fingertips. But with all this information, it may be difficult and time-consuming to sift through all the clutter and find crucial and pertinent information that can help you pinpoint the right location for your business. Directory of Major Malls online access site ShoppingCenters.com is one example of a helpful tool, which can consolidate and provide retail location information for you to easily understand and utilize to your advantage. It is often used by retailers to locate similar retailers serving the same demographic, pinpointing locations in malls which meet certain specifications, and finding out where competitors have stores. In additional to utilizing online data sources for your research, here are some general tips and strategies to be used offline, as you begin investigating and leasing a commercial retail space in today’s real estate market.
Start by making a list of criteria you are looking for in a commercial space. The basic things to consider are cost, location and which features will help your business operations run smoothly (e.g., providing parking spaces for customers and employees). Then find a commercial real estate broker who focuses on tenant-side work and has a strong knowledge of your desired location. Come up with at least two or three potential locations and then you can begin discussions and negotiating. When negotiating, prepare to let your broker take the lead in negotiating the discussions, although be informed about the details, ask questions and learn from the process.
Price is one of the most important factors when renting a commercial space. Ask for the price and compare it with other places. Inquire on how the chargeable square footage is measured and calculated, so you can make proper comparisons between buildings. See if you can afford to pay the three months rent deposit for the space. Check comparable rents in order to determine if what is being quoted is reasonable and similar to nearby establishments. Be clear about when the lease begins, when you can take possession of the space, and when it expires. Fully understand if there are any rent increases and exactly how and when they are calculated. Clarify whether there are any extra costs such as utilities, taxes and insurance, and common area maintenance charges.
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Location, location, and location. Is the location near your suppliers and more importantly, potential customers? Although distance is an important factor, see if there is a lot of foot traffic near the location. What kind of public transportation passes through the area? What’s the demographic profile of the residential and day-time population? What are the busiest times and does this match up with your expected operating hours? Rather than simply believing the input of the landlord, walk around the area yourself at various times during the day and night. Consider how secure the location and area seems and review historical information about crime rates. If the location is in a transitional area, be clear that it is developing and transforming in a positive direction. One recent example is the South Bronx, which in some areas has a reputation for higher levels of criminal activity. However, more recently it is becoming a new frontier out of the five major boroughs of New York. “People are looking for the next hot spot, and the Bronx is this hub. It’s very close to Manhattan,” said Brenda E. Rosen, the chief executive officer of Common Ground. The South Bronx offers a shorter commute to Midtown than many parts of Brooklyn and Queens, and it also has abundant housing, a wide mix of Art Deco prewar buildings, historic row houses and single-family houses. “In the last six months, listing for co-ops in the Grand Concourse Historic District has turned into bidding wars, with buyers from Brooklyn and Manhattan laying out all-cash offers.”
Once you’ve found the best location for your business, and you and your broker have successfully negotiated a fair and suitable deal, hire a real estate attorney to examine the lease document. Items to consider are whether you would be allowed to sub-lease the space, have exclusivity to avoid having competitors open in the same building or complex and the ability to assign the lease to a new leaseholder. Ultimately it is important to engage an attorney who regularly negotiates commercial property leases rather than a general counsel attorney who may lack the expertise. The real estate attorney will help you understand and identify nuances necessary to solidify a favorable lease which will protect your interests as you build business in your new location.