Top 4 Myths About Commercial Leases

You’re running your own business because you’re an expert in your field, but you probably don’t know much about commercial real estate.

So, when it comes to signing your commercial lease, you might feel a little bit out of your depth. You might even be going into it with one of two attitudes:

a) I’m sure this is all fine

b) I’m sure they will try to fleece us

To help you go into the process with a bit more information and confidence, let’s explore some of the most common myths about commercial real estate and leases.

1. All Commercial Leases are Standard and ‘Pretty Much’ the Same

If this were true, it would certainly simplify the entire process. But this is not the case.

Even if this is your first venture into renting a business space, and you don’t know much about it, you should never just sign your lease and assume, “I’m sure this is all fine.”

You may be itching to move in and just want this process over as quickly as possible, but you should always read your lease, or have someone who has done this before read it over and make sure there are no red flags are surprises.

Macintosh HD:Users:ryanleclaire:Downloads:Lease.default.jpg

2. You Need a Real Estate Lawyer to Read Your Lease

Yes, you need someone to read over that lease, but no, it does not necessarily have to be a real estate lawyer.

If you have a lawyer friend who owes you a favor, or you already have a lawyer on retainer, by all means, get them to read things over for you. However, if you’re a budding startup and trying to keep your costs down, there are more affordable options that will still give you the same level of guidance.

There are non-lawyer specialists that can help you with your first lease or can show you how to renegotiate a commercial lease for far less than a lawyer would charge. The right set of eyes on a lease before you sign it can really help you get a better deal, and avoid getting trapped into something you regret.

3. The Price of Rent Should Be the Decision-Maker

Most business owners will shoot for a comfortable place in the size-to-cost ratio. However, rent is only one part of the financial equation.

You need to look at your entire occupancy costs, which will include some variation of your:

  • Rent
  • Ongoing Maintenance
  • Property Insurance
  • Taxes
  • General Liability Insurance
  • Security Services
  • Utilities

For example, a price break in the rent for an older building can quickly be erased if you’re paying for an old and inefficient heating and cooling system.

Also, paying a bit more for rent can also be made worthwhile by favorable landlord concessions, which are common in commercial real estate.

4. Smaller is Better

You should also keep in mind that the space you rent today will play a major role in shaping your work culture in the future.

If you’re a restaurant, you want your employees to see that you expect to grow very soon. If you’re opening an office, you would probably want your employees to feel they’re in a cool workspace, not a fly-by-night boiler room.

This is definitely one of those things where spending a little bit of time doing your homework and asking for a bit of help now can save you a lot of headaches down the road.

Your first building lease will be one of the first big decisions you make for your new business. Be sure to treat it as such!

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.