5 Things to Consider Before Leasing Your Commercial Property
1. Research the market.
It’s important to thoroughly research your market before leasing any commercial property to ensure a successful (and profitable) outcome. Understanding current vacancy rates in your market and learning what the average market rates are for commercial properties similar to yours will make all the difference when it comes time to lease your space.
This is particularly important for office buildings. If the average leasing rate per square foot is lower than you’d expect, it may be beneficial to divide your space to accommodate multiple tenants. The same is true for industrial buildings — you don’t want to end up with a big vacant building because tenants have more affordable options to choose from in the market.
The key takeaway is this: don’t assume that all commercial properties have the same vacancy rates and lease costs – do your research!
2. Research prospective tenants.
Just because your commercial real estate is in a prime location does not mean you’ll automatically end up with “prime” tenants. It’s crucial to learn as much as you can about a prospective tenant before they sign the lease. A thorough review of the company financials is a good place to start. Make sure the company is sound, with strong cash flow to assess whether or not they’ll be able to afford your space for the length of the lease.
It’s also important to consider any special requirements a tenant may have. Things like oversized exterior signage, extra parking, or unusual permits should all be discussed before they move in. Be sure that a prospective tenant won’t try to modify the property too much to suit their needs while ignoring yours … this is especially true for commercial properties that lease to multiple tenants. You don’t want sudden vacancies because one tenant with special requirements made your property a bad investment for other renters.
3. Evaluate Asset Management Capabilities.
When it comes to leasing commercial real estate, there are many moving parts. Leasing the space is just the beginning … between market research, regular maintenance, and proactive lease/vacancy management, asset management is a big job. If it’s an affordable option, you may consider hiring an asset management company to handle all the responsibilities.
4. Consider Tax Implications.
Given the current political environment, tax laws at both state and Federal levels seem to be in a state of flux. Be sure to consult with your attorney(s) and accountant(s) to stay current with these changes. Should any new laws or regulations take effect, you’ll need plenty of time to budget and plan for higher tax rates and/or new deductions.
These changes will likely impact both current and future lease agreements, so it’s important to plan in advance and give tenants plenty of warning before any rent increases.
5. Embrace the Cloud.
If your commercial real estate isn’t up to speed when it comes to security, technology, and asset management, it may be time to upgrade your systems. These days, “smart” technologies can make all the difference when it comes to attracting new tenants. Commercial properties already wired for high-speed internet will likely outperform those that don’t, especially when online access is now critical for every business.
Beyond internet access, cloud-based security services can vastly outperform dated security technologies and will likely be a key selling point for prospective tenants. Further, they allow property managers to closely monitor all security-related activities with just the click of a button, giving you the peace of mind that your property is safe and secure.
There are many factors to consider when leasing commercial real estate, but the more information you have, the better the outcome. Whether you’re in the market to purchase an investment property or lease commercial real estate you already own, there is an SIOR available to assist. Please contact us today to learn more about how we can help.
We are the Western Missouri/Kansas Chapter of the Society of Industrial and Office Realtors (SIOR). SIOR is the leading professional commercial and industrial real estate association. With members in 630 cities in 34 countries, SIOR represents today’s most knowledgeable, experienced, and successful commercial real estate brokerage specialists.
I appreciate this information about leasing commercial property. I have been leasing for quite some time and I am not fully aware of the tax implications, but will surely consider tracing them all now. This is a superb tip about leasing, thanks and keep up the good work!
Very nice article and helpful too you have done a wonderful job even for those who does not have any experience about the real-estate.
Keep it up.
Good articles that outlines major considerations. I especially like the focus on property management and cloud security, both of which are important to everyday office functionality!
Great post!
An excellent piece of content but, one thing that you forgot is to make sure that your property is well-maintained and there are no repairs needed so the tenant doesn’t have any problems when he is in your property. Most landlords leasing properties in MacombCRE actually check if there isn’t any wiring or plumbing issues before leasing the property.
I would recommend to consider the following factors: Renovation costs, Rent, Utilities, Security, Parking and Internet connectivity.
Excellent post, Thanks for sharing the 5 Things to Consider Before Leasing Your Commercial Property. Your article is very helpful.