Things to Consider While Leasing your Commercial Space

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Many people think that leasing out a commercial space is a very easy job to do after finishing the not-so-easy job of buying a commercial space.

It’s totally agreeable that buying a commercial space will take more time and efforts than leasing it out.

But does that mean you can go ahead without taking good care? Definitely not!

At the end of the day, a good property can give you good returns only if it’s been put to good use!

Hence leasing out your commercial space is the most important decision. Spending time on knowing the pros and cons of leasing your commercial space will totally pay you off!

Here are must know things that you should know while leasing your commercial space! (If you want a profitable deal *wink*).

Hang in tight!

Let’s get started!

 

Number 1 – Get to know your prospective tenants

Once you’ve put up an ad for your commercial space, you will start receiving queries from your tenants and your email will be bombarded with hundreds of mail queries.

You must spend a good time in knowing your tenants well. This is especially important because this will give you a fair idea about their ongoing paying capacity.

Isn’t it a pain to lease out your property to someone who must be reminded and pestered to pay you on time in the long run?

Why take that pain and risk when you can just weed out the bad actors upfront ? There are hundreds of other tenants who are willing to lease your property. You just need to make sure you perform a due diligence on every offer received.

Feel no shame in asking them to produce their financials in front of you so that you can assess their paying capabilities and see if they have a long-term cash inflow system. One of the best ways to confirm this is to know their commercial real estate funding method. There are also other specific things you need to ask your tenants like:

  • Is there a considerable amount of foot traffic to their business? This must be assessing you as well as your tenant because if there’s no foot traffic (Assuming it’s a business with walk in customers), what’s the whole point of the commercial space? Your tenant will fail to maintain a successful business which will force him out of your property. And that leaves you with what? You need to run the entire process of putting up an ad and replying to queries all over again! So waste no time later! Take time now and assess if your tenant can do good business at your commercial space.
  • Does your tenant want a corporate signage outside the building of your commercial space? Do you accept this term?
  • What are the consequences of your tenant not acting according to his obligations that are specified in the lease deed agreement? Defining this in prior becomes most important in order to safeguard your interests.

 

Number 2 – Do your research on the commercial properties

Never make the biggest mistake of assuming that all the commercial properties have the same vacancy rates and the same per square foot rates in the locality.

One of the easiest ways to know the competitive price of the commercial real estate property is to talk to a commercial real estate loans provider who will have good knowledge in the field. Also, they have great relationships with prospective buyers looking for commercial loans from them, and just being in the business of serving commercial real-estate loans gives them insights of the competitive commercial market.

This can be the easiest way to actually know about the most competitive price for your property!

You must fix upon a price which must be competitive as compared to other properties in the area.

Do your research by taking an evening stroll in the area and enquiring about the rates of the commercial office spaces.

What are the vacancy rates available to these commercial spaces?

How many commercial buildings or properties are there in the area and what are they’re per foot rates? Is your rate too less or too much as compared to the rates of these properties?

Is there any specific reason for you to prove your property too less from others or too more from others? Is this reason justifiable and do you think your tenants will be wiling to purchase your property regardless of this difference?

This research is the basic research you need to carry before leasing your commercial space.

 

Number 3 – Asses the asset management capacity

Asset management capacity becomes very important while leasing out a commercial space. If you pay less attention to this sector, your chances of having a profitable lease will diminish significantly.

You can do it on your own if you have the required knowledge or you can hire an asset management company that’ll allocate you a team of asset managers who shall do the job for you!

Asset management includes everything ranging from setting a price for your commercial property to qualifying asset improvement needs, such as recommendation towards making improvements to your existing property like making parking lot space additions to the building and so on.

They watch and verify the financial stability of your tenants so that they can have you rest assured that your tenants are going to pay up on time!

Asset managers will also undertake to check the energy sustainability of your building and get an energy audit done for your building.

Different asset management companies have a different set of such policies and you can benefit a lot in the long run.

 

Number 4 – Upgrade the technology of the building if it’s necessary

One of the most important things a tenant looks for in a building is the technological capacity of the building.

Is your building equipped with the latest technology that is needed?

The answer should generally be yes! If not, you must make the answer a yes by upgrading your building.

It takes a little extra investment to upgrade your building but you can achieve great profits as this attracts a lot of high paying clients towards you. So check the cable wires and improve the WiFi facilities of the building.

Access to the digital world is one of the most important things tenants look for. If your building has got poor network facilities or low internet connection, forget getting high paying clients for your commercial space.

You can apply for commercial real estate property loans especially like the bridge loans to get funding for making capital improvements for your building. It’s a little investment that’s going to pay you off in big numbers! So this one must definitely go to your checklist!

 

Number 5 – Know about the changing tax implications

It’s very important to consider the changes in the tax applications of the country when you’re leasing your commercial space.

If there’s any increase in the tax percentage paid on the income earned by the business or commercial property, you might end up regretting later for not including this in the price of your property.

Thus it’s always advisable to talk to a tax attorney and charge the final price of the property which will be taken only after the consultation with a tax expert. Know all the changes that are made in the federal, state and local taxes of your locality.

If you’re also thinking of buying a business property or an asset, you should again consider looking into the tax implications of the area where you are buying, because some business assets can cost you a fortune in terms of amount of taxes which might make you regret later!

So avoid regrets! And consult a tax attorney!

 

Number 6 – The property management capacity

One needs to take into account the property management capacity of the owner. There are some owners who check the building on their own and collect the lease fees on time.

While some owners resort to hiring asset managers or property managers who’ll do the job for them with a more systematic and scientific approach! Which one are you?

Can you take care of the building as well as a collection of lease fees by yourself or you think you lack the required skills there or maybe you’re just too forgetful of a person?

Property managers typically help by offering services such as collecting lease’s rent. Ensuring that lease is in effect in full-force during the entire term, they will assist with paying with property’s nominal business expenses which are typically filed under operating costs. They also help with any eviction noticed to be dealt with. Taking tenants customer service calls – such as maintenance calls etc.

 

So there you have it! Those are the Must-Know 6 things you need to consider before you lease out your commercial property!

One thing you must not forget is that the whole point of leasing out the property is to make good profits and hence utmost care must be taken before leasing your commercial space.

There have been cases wherein the owners lost a lot of their money simply because the tenants were too troublesome although the commercial space was just the perfect one!

Regretting later will do no good to your decision, right?

So make no mistake in this regard and pay attention to all the aforesaid notes! Having said that, wish you a happy leasing out experience!

Want to learn more? Get in touch with us today.

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