The challenges that come with a growing business can be scary and overwhelming. It could mean more responsibilities and hard work.
How do you negotiate the terms for leasing a warehouse? Do you know where and how to start? If you have no idea, find the answers here.
Determine Your Leasing Budget
It’s always wise to have a full grasp and understand how much money you’ll need and how much you have at your disposal. Know that warehouse space can be costly due to their large size and floor area. Aside from that, you also need to deal with the following:
- Incidentals: Some costs you may need to check on with the landlord are property tax, insurance, repairs, maintenance, and utilities. Some warehouse rentals may also come with other expenses—janitorial services, general building maintenance, snow removal, etc. It’s best to know them upfront to avoid conflict later on.
- Rent increase: Talk with the landlord and determine how much the rent and incidentals will increase over the agreed lease term. Rental agreements often start with a low base rent in the first year but may increase significantly in subsequent years.
- Moving and renovation costs: This hidden cost is often omitted or forgotten when calculating a budget. But because these are expenses, you need to factor them all in. You must check how much more you’ll allocate to set up utilities (electricity, internet), and signage. You must also factor in any renovation costs if you are permitted to renovate.
After accounting for all the expenses associated with leasing the warehouse space, you’re now ready to find the space and talk with a landlord.
You already know what goes on in your warehouse, including the number of people expected to use the space. Hence, you can calculate if the warehouse square / cubic footage is adequate for your current business needs and future needs.
As a general rule, you must allow for 20% more space than you think you need for future use. You can also check if adjacent properties are available for future lease in case of business expansion.
By being proactive, you ensure that when business volume increases, the warehouse and any adjacent properties available for lease will fit your expansion plans. This way, you won’t be stuck in a warehouse on a 2-year lease that no longer fits your business.
Climate Control and Safety Features
This is another essential consideration. Choose a warehouse space with provisions and solutions for climate control. Check if there are any existing functional heating and cooling systems. Simultaneously, determine the warehouse’s security provisions—alarms, security cameras, etc.
Zoning and Parking
Sometimes you see a warehouse that you think is suitable for your business needs and you want to just jump in and lease it. However, there are two things that you need to check with the landlord about before you make that leap: zoning and parking.
Check if your business is approved to operate per local zoning laws. Knowing this will prevent you from entering into a lease agreement where you can’t operate due to incorrect zoning. You must also ensure that the facility has sufficient parking for the employees, visitors, vendors, and delivery/cargo vehicles.
Talk to the Landlord
At this point, you have all the information you need regarding the warehouse and its leasing costs. It’s time to talk to the landlord to negotiate the lease terms such as gross rent lease, contract term, termination, pre-termination clauses, discounts, etc.
A lease agreement will contain all those terms and conditions. Both parties will review the draft and negotiate for revisions if any.
Looking For a Warehouse?
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.