How To Lease a Commercial Space for Your Business
March 28, 2023 | Business Storage
There are many industries that lease commercial space—tech, finance, health, media, law firms, and retail just to name a few. If you’re new to commercial leasing it’s essential to understand that entering into this type of lease agreement is more complicated than renting a house or an apartment.
The first step is to identify properties that have enough space to meet all of your business needs whether it’s a mix of office and warehouse space, offices only, or another type of commercial space such as retail. The most popular online platform to find commercial properties to lease is LoopNet.com.
Secondly, you’ll want to enlist experts to assist you along the way. Professionals like accountants and lawyers can be worth their weight in gold if it means avoiding costly mistakes or potential lawsuits.
Depending on the type of business you’re operating and lease you’re pursuing, you may be able to rely solely on a real estate broker if you have full confidence this person has your best interests in mind and solid lease agreements that adhere to your state’s real estate laws.
The Four Types of Leases
There are four types of leases—gross leases, net leases, percentage leases, and variable leases—geared towards every type of business from large commercial enterprises and professional firms to start-ups and mom and pop shops. So let’s have a look at each one.
Gross leases offer a fixed rental rate and are the most common for commercial properties, including offices and retail spaces. This type of lease has variations, so it’s best to understand the details and consult with your accountant and lawyer before signing anything.
In general, a gross lease means you’ll pay a single, flat amount for rent and the landlord will pay for taxes, utilities, and insurance and operating costs of the building. The advantage to this type of lease is that your rent payment won’t vary month-to-month.
However, gross leases are often modified to allow the landlord and renter to decide what expenses will be covered by each party. There are enough variables in a gross lease that you’ll want a knowledgeable negotiator on your side.
A net lease mostly favors the building owner because the renter pays for all incidental costs in addition to the monthly rent. However, this type of lease can be a good match if you want to avoid the hassle of hiring third parties to repair and maintain the property if any issues should arise.
Net leases are among the most common options for commercial business owners, including warehouse and distribution companies and manufacturers.
Like gross leases, there are also subtypes of net leases that determine if the renter pays for taxes, maintenance, and insurance. A single net lease covers one expense category, a double net lease covers two, and a triple net lease means you’ll pay for all three—taxes, maintenance, and insurance. The building owner can also pass along other fees, such as association dues.
Remember that rent is not fixed in a net lease, as expenses will likely increase over time. For example, a net lease relieves the property owner from factoring in variable taxes maintenance so that you can negotiate a lower rent. So before signing on the dotted line, check with your CPA to determine what type of net lease is the best choice for your business.
Percentage leases are designed for business owners who want to pay less rent upfront but are willing to share a percentage of their profit with their landlord. For example, a start-up business entrepreneur might choose this option to protect their cash flow, knowing that if they’re successful, their rent will increase through profit sharing.
Try to negotiate a percentage lease so it begins once your revenue reaches a certain level. Doing this will likely incentivize the property owner to provide you with a better location in a retail shopping center or business district.
Variable leases might be the most complicated type of agreement to negotiate because it changes according to specific conditions completely out of your control. Variable lease payments are often based on an index. For example, variable lease payments can be linked to a consumer price index, a benchmark interest rate (such as LIBOR), or vary to reflect changes in market rental rates.
While an index variable lease ties the rent to an index, a graduated lease changes based on other factors, such as the location or type of business you’re operating. For example, if you own a business that caters to tourism, paying a higher rent during the high season is standard with a variable lease.
You Don’t Have to Go It Alone
As a business owner or manager, your time is valuable. A plan to relocate your business to a new location is a big undertaking not to mention an additional project to manage. Working with a commercial real estate and office space broker will help you find the right type of space to meet your business needs and negotiate the lease agreement.
Additionally, real estate professionals do more than sell properties and represent buyers. Commercial real estate agents not only sell properties, but they are also involved in leasing and renting properties.
Metro Offers Business and Commercial Storage Solutions
Since opening our first storage facility in 1973, Metro Self Storage has become one of the nation’s most respected storage providers. We cater to businesses who need temporary or long-term storage solutions to help run their operations smoothly and efficiently.
So if you’re deciding whether to commit to a long-term lease or your fast-growing business is bursting at the seams, our professionally trained team is ready to help match you with the right storage unit features for your business.
- 24-Hour Security System
- Major Credit Cards Accepted
- Month-to-Month Leasing
- Online Bill Payment
- Well-Lit Facility
- Wide Driveways
- Climate Controlled Units
- Drive-Up Access
- Interior Loading Bays
When you choose Metro Self Storage you won’t have to worry about complicated or long-term leases. Whether you need long-term or short-term storage or something in between, our online rental process is simple.
Visit Metro Self Storage or contact us to find the right storage solution to meet your business needs.