Losing the Terminology War
Remember when I mentioned that you need to familiarize yourself with the commercial real estate lingo? Well here's why. When you ask to see properties of a certain size, what the agent will show you is usable space. But, usable space is just the space you actually occupy physically. It doesn't include the common areas such as the entrance hallway into the building, rest rooms, etc. The square footage these areas occupy is indicated as a percentage of the usable space, and if you add the amount of square footage for this common area space to the usable space you are asking to see, you'll get the rentable space (aka leasable space) WHICH IS WHAT YOU WILL PAY FOR. So, don't stroll around with the real estate agent while figuring the price in your head based on the amount of space you are asking for and assume that's what you'll pay, because it's not. You have to pay for the common area space as well. That's our first warning.
Don't forget that your lease will probably also have an annual increase built into it right from the start. That's right. These are called escalation clauses. Your landlord has to account for inflation, increases in the market value, etc. The landlord may offer a fixed increase, or a percentage based on the consumer price index. Don't hesitate to negotiate those points.
Read the Fine Print!
Make sure you've read every word of your lease before you sign it and negotiate with the landlord to reword any sections that are going to be unrealistically hard to abide by. Remember the lease was written with the landlord's interests in mind. Watch out for things like:
- limits on hours of use for the property
- requirements that state you have to leave the property exactly as you found it without accounting for typical wear and tear
- limitations on alterations to the property
- subletting restrictions (Remember that you may not need all of the space you have leased, or you may be acquired by or merged with another company changing your legal ownership.)
- restrictions on lease renewals. Make sure there is a provision that will allow you to renew the lease if you so choose, so the building is released to someone else out from under you.
- common area maintenance. Negotiate, negotiate, negotiate.
- landlord administrative charges. You may be able to get the landlord to drop this.
Watch your Bills!
According to an article entitled "Commercial Real Estate," by Ed Eriksen published at the Online Women's Business Center, your landlord may charge you for after-hours increases in utility costs like heating and air conditioning. If you find this is the case, make sure you review the bill closely and make sure the electric rate you are charged is truly the rate for that period of time. Typically, the after-hours rates are lower. Check with the local utility company to verify the charges before you pay.
If you are entering a building that houses some much larger businesses than yours, also make sure you're not paying for some of their expenses. Landlords will often have special deals arranged with large tenants that provide them with longer operating hours, which will in turn mean higher utility bills, higher security bills, etc. Make sure you're not paying for those services. Check the bills you receive from your landlord and make sure all of the expenses are yours.