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What To Know Before Leasing Space for Your Business

Marcus Haynes Headshot
by Marcus Haynes, AVP, Regional Sales, Main Street America Insurance •

Leasing commercial space for your business can be a daunting task, especially if you are a first-time business owner. There are many factors to consider that can have a significant impact on your business's success.

Understanding the Different Types of Leasing

Before diving into the leasing process, it's crucial to understand the different types of leasing options available. The three main types of commercial leasing are industrial, office, and retail.

Office Leasing

Office leasing is the most common type of commercial leasing. It involves renting space for administrative and professional purposes. Office spaces can range from small individual offices to large corporate headquarters. When considering office leasing, it's essential to consider factors such as location, amenities, and lease terms.

Retail Leasing

Retail leasing involves renting space for businesses that sell goods or services directly to consumers. These spaces are typically located in shopping centers, malls, or standalone buildings. Retail leasing can be more expensive than other types of leasing, but it offers high visibility and foot traffic for businesses.

Industrial Leasing

Industrial leasing involves renting space for manufacturing, storage, or distribution purposes. These spaces are typically large and have high ceilings to accommodate machinery and equipment. Industrial leasing is often the most affordable option, but it may not be suitable for all types of businesses.

Location, Location, Location

When it comes to leasing commercial space, location is crucial. The location of your business can significantly impact its success. Before choosing a location, consider factors such as accessibility, visibility, and competition.

Accessibility refers to how easy it is for customers, employees, and suppliers to reach your business. If your business relies on foot traffic, you'll want to choose a location with high visibility and easy access for customers. If your business relies on deliveries, you'll want to consider proximity to major highways or shipping ports.

Visibility is also essential, especially for retail businesses. A location with high visibility can attract more customers and increase brand awareness. However, these locations may come at a higher cost.

Lastly, consider the competition in the area. If there are already several businesses offering similar products or services, it may be challenging to establish your business in that location. On the other hand, being in an area with complementary businesses can attract more customers and create a sense of community.

Lease Terms and Negotiations

Before signing a lease, it's crucial to understand the terms and conditions thoroughly. Leases can be complex and may include hidden fees or clauses that can be detrimental to your business. It's essential to have a lawyer review the lease and explain any terms that you don't understand.

Additionally, don't be afraid to negotiate the terms of the lease. Landlords are often willing to negotiate, especially if it means securing a long-term tenant. Some areas to negotiate include rent, lease length, and maintenance responsibilities.

Hidden Costs and Fees

When leasing commercial space, it's essential to consider all the costs involved, not just the monthly rent. Some hidden costs and fees to be aware of include:

  • Security deposit: Most landlords require a security deposit, which can range from one to three months' rent.
  • Utilities: Depending on the lease agreement, you may be responsible for paying for utilities such as electricity, water, and internet.
  • Maintenance fees: Some leases include maintenance fees, while others require tenants to cover maintenance costs.
  • Insurance: You may be required to have insurance for the leased space, which can be an additional expense. Other business insurance may be required as well.
  • Common area maintenance (CAM) fees: These fees cover the maintenance and upkeep of common areas in a building or complex, such as parking lots, hallways, and elevators.

It's essential to factor in these costs when budgeting for your business's monthly expenses.

Consider Your Business's Future Growth

When choosing a space for your business, it's essential to consider your business's future growth. If you anticipate your business expanding in the next few years, you'll want to choose a space that can accommodate that growth. This may mean choosing a larger space than you currently need or negotiating a lease with an option to expand.

On the other hand, if you don't foresee significant growth, you may want to consider a shorter lease term to avoid being locked into a long-term lease for a space that may not meet your needs in the future.

Understand the Lease Termination Process

No one likes to think about the possibility of their business failing, but it's essential to understand the lease termination process in case it happens. Before signing a lease, make sure you understand the terms and conditions for terminating the lease early. Some leases may have a buyout clause, while others may require you to find a replacement tenant.

Seek Professional Help

Leasing commercial space for your business is a significant decision that can impact your business's success. By understanding the different types of leasing, considering location, negotiating lease terms, and seeking professional help, you can make an informed decision that sets your business up for success. Remember to thoroughly review the lease and consider all costs involved before signing on the dotted line. With these tips in mind, you can find the perfect space for your business and take the first step towards achieving your goals.

Navigating the commercial leasing process can be overwhelming, especially for first-time business owners. Make sure you contact an insurance agent to understand the requirements for leasing a space and a real estate agent to help you navigate your search. These professionals have the necessary experience to support your journey and to ensure your business is properly protected.