Renting commercial space is a big move when you’re putting up a business. Aside from finding the perfect space, you also need to understand the process of renting commercial space to make sure that your investment won’t go to waste. Whether you choose a warehouse, retail shop, or restaurant, renting a commercial space is not as easy as it sounds. Some business owners take some time to find the perfect commercial lease and sometimes can take up years for them to sort everything.
Before you decide on signing the contract, this article will help you to better understand how commercial leases work and the things you need to consider before you decide on renting the commercial space.
The full-Service Gross Lease is a type of commercial lease where the tenant only pays for the fixed amount of the rent while the landlord/owner pays for the operational costs such as maintenance, property taxes, and utilities. If there are other tenants in the building, the share for the operational costs will be pro-rated depending on your share of the building’s square footage.
- The tenant doesn’t have to pay a different amount for the rent every month.
- It’s easier to budget the monthly rent on a fixed rate.
- Higher monthly rent
- Fluctuating rent due to excessive use of utilities such as electricity, water, etc.
- Rent may still increase if property taxes or insurance rate goes up
This type of commercial lease is where the tenant pays for the rent and some parts of the operational costs. There are 3 types of Net lease:
- Single-Net lease – the tenant will pay the rent plus one of the operational costs
- Double-net Lease – the tenant will pay the rent plus two of the operational costs.
- Triple-Net Lease – the tenant will pay for the rent plus all maintenance, taxes, and insurance.
- Base rent is lower
- Higher operational costs if the building requires a lot of maintenance.
- Rising property taxes rate
Modified Gross Leases
This type of commercial lease is where the tenant pays the few operational costs based on what’s agreed-upon with the landlord. It stands between a gross lease and a net lease.
- Lower operational costs for the tenant
- More opportunities for keeping up the business
- If the landlord is not responsible enough to keep up with the maintenance shouldered by the tenant, there’s a chance that the tenant will have to pay more than they’re supposed to.
Term and Early Termination
A long-term lease is mostly preferred by owners. Although getting a long-term lease is an advantage, it might also be a liability if you go out of business within the contract term. So a 1-year or a 2-year lease is good enough if you’re just starting your business. If there’s an unfortunate event where you have to stop the lease within your term, make sure to ask for a provision on the contract so you can have the right to transfer when you sell your business. In this way, the new owner will take over and stay in the same space. At the same time, you’ll also be able to sublet the space or a part of it if you can’t pay the rent or need a bigger space.
Research about the Location, Landlord, and Neighbors
It is best to check the area of the commercial space you’ll be renting to make sure it hits your target market. Also, do a bit of research about the landlord. Make sure that the landlord is responsible enough to keep up the commercial space properly and that it is updated with all the payments to the bank or the building owners to avoid sudden eviction in the future.
You also need to check for competitors in the neighborhood. You may also ask for an exclusive-use clause so that the landlord doesn’t rent a nearby space to your competitors.
Get a Real Estate Agent
If you don’t want to go through the hassle of sorting the lease, you may seek help from a real estate broker. It’s a lot easier and they can help you get the right commercial space for you to sort the paperwork. Plus you don’t have to pay their commission because it’s usually paid by the landlord or the owner.
Schwarz Can Help You Find the Perfect Commercial Lease!
Contact us for help finding the perfect warehouse space for rent in Asheboro, North Carolina! Schwarz Properties specializes in commercial and residential property management in Virginia, South Carolina, and North Carolina. We lead the market for industrial and warehouse spaces for lease and our portfolio also includes retail space, restaurant space, residential, office space, and many more. Please contact Schwarz Properties at 336-895-1336 or visit our website.