Understanding the Leasing Basics of Commercial Property

how to lease commercial property

Are you thinking about leasing a commercial or industrial property? Companies lease space all the time, but there are some things to keep in mind so you understand your options. At Ullian Realty in Brevard County, Florida we have helped many clients clarify leasing details of commercial or industrial properties before signing a long-term lease. Here are four things to consider about the leasing basics of commercial or industrial property.

What are Basic Commercial or Industrial Leasing Options?

Along with different floor plans, zoning uses, and building infrastructure, come leasing options. Generally, the two main types of leases are net leases and gross leases. A net lease is a lower base rent and is what a Landlord keeps in their pocket, thus a net lease does not include real estate taxes, building insurance, and common area maintenance expenses (NNN/CAM) that are paid as additional rent by the tenant based on their square footage leased and actual costs. A net lease provides less risk to a landlord.

A gross lease is a larger amount per month, but it includes the NNN/CAM expenses mentioned above included in the lease rent payment. This type of lease is often easier to budget and common if there are many tenants within a building and provides less risk to a tenant because they have one rent amount to pay. Depending on how you intend to utilize your commercial space you may find one leasing option preferable over the other.

While leasing a property is often the best option for a business, it’s important to evaluate whether to lease or purchase a commercial property before finalizing a lease agreement.

Confirm Leasing is the Best Choice

For businesses that have outgrown their current space, renting is often considered the only option. However, buying property is not without its advantages. Investing in a commercial property can create tangible value the business can profit from.

One of the key benefits of owning commercial real estate is the savings from property taxes companies can gain. Owners can deduct interest payments on their mortgages to take advantage of the depreciation of the building. Additionally, there are non-mortgage-related expenses, such as insurance and maintenance costs, which are also tax deductible. With proper management, owning property appreciates over time, allowing businesses to benefit from this increased value when selling it further down the line. By investing in your own space, your company can build a valuable asset that could be used to grow your business or increase capital liquidity.

If you’re a new business or aren’t interested in the additional costs that may come with being a property owner, then it’s best to pursue a commercial lease agreement. Here are a few items to consider when leasing.

How Much Space Will Your Office Require?

The first step in commercial property or industrial property leasing basics is to determine how much space you need. What direction do you envision your business going based on your business plan? Leasing a location or moving into a new space can be expensive and time-consuming. Make a list of the pros and cons of your current space to determine what is most important. Do you plan on hiring more employees or offering a new product or service? Take all of this into consideration when figuring out how much space your commercial business needs. Thus a space analysis should be defined with Ullian Realty assistance to determine your requirements.

Have You Estimated Your Business Costs?

What is your budget for a commercial lease? You need to calculate the cost of utilities, equipment fit-up, moving expenses, and other normal costs that come with running a business. A real estate team can help you assess your needs and determine an average monthly lease based on variables that are common with businesses.

Do Your Location Research

Location is a major factor to consider. Not only does it affect potential access to customers, it may also impact the lease terms. When deciding on a location, business owners must look at the area’s existing complementary businesses. Retail space and office space have similar location requirements to consider, such as parking options, common area maintenance costs, proximity to amenities, and usable space.

However, the other factors to consider include zoning laws and commercial property lease terms, which will vary depending on the type of business looking to lease property.

Consider Your Lease Options

When it comes to leasing a commercial space, understanding the three most common types of leases is integral in making the right choice for your business. The main types of leases are full-service or gross leases, net leases, and modified gross leases. Each offers different benefits and drawbacks, depending on your needs and budgetary considerations.

Yes, You Should Hire A Real Estate Broker

You have a business to run, so hiring a real estate broker who understands what’s currently on the market will save you time and money. A real estate broker can assess your needs and come up with creative options to find the perfect commercial or industrial space to lease. The ideal space for rent can move quickly, so hiring a real estate team will prevent you from missing out on a commercial or industrial rental.

Looking to lease commercial or industrial real estate on Florida’s Space Coast? Ullian Realty has over 50 years of combined experience working with clients locally. We understand that every business has unique requirements to thrive and work diligently with all our clients to find the best solutions. Contact us to schedule an appointment to learn more.

 

This article was originally published in April 2019 but has been updated for accuracy and freshness.