Selecting commercial real estate for your business is a major business decision. Understand upfront what you need, then follow through with informed inspections and negotiations.
The process of leasing or purchasing commercial property should be well thought-out. The cost to lease or purchase commercial real estate is usually one of a company’s largest annual expenses, so you want to get it right with the least time and expense.
Implement a site selection process before looking at properties and negotiating a lease or investment to guide you toward that ideal office, industrial or retail space.
Step 1: Define Needs
The two most important factors for you to consider are how much space you need now and in the future and what geographic location will best serve your business or company.
Develop an internal questionnaire to pinpoint what you need.
For space determination, include
- number of current and anticipated employees
- number of private offices required with approximate square footage per employee (i.e., sales vs. executive offices)
- conference room, training room, kitchen area square-foot requirements
- storage, telephone, miscellaneous-area square-foot requirements
- warehouse requirements: number of pallet positions, ceiling height, loading
- facilities, etc.
- light assembly and manufacturing requirements, including number of machines and employees and power requirements.
For location determination, include
- access to labor market and customers
- transportation and parking requirements
- the “image” that a property projects
- nearby services and amenities (restaurants, hotels, etc.).
Once you define your business’s or company’s needs, you’ll greatly reduce the time involved to identify suitable properties.
In addition, owners and brokers will view you as a serious tenant or purchaser who has taken the time to determine your business or company needs in a professional manner.
Step 2: Analyze the Market
Sources to help you find suitable space include real estate brokers, classified advertising, economic development agencies and chambers of commerce.
A tenant representation broker will have access to all of these market sources and more in pursuit of the right properties for your consideration.
Step 3: Inspect Properties
When inspecting suitable properties, ask as many questions as possible regarding landlord or seller responsibilities and expectations. Specific items to address include
- condition of the premises at occupancy
- age of the roof and mechanical systems
- environmental issues.
This will help you gather useful information for the negotiation phase. It is easier to obtain information in a “non-negotiation” environment than at a later time.
Learn more about a property from information that your tenant representation broker can give you, including
- data sheets
- site and floor plans
- general information regarding the history of the property
- a demographic profile of the area.
Step 4: Negotiate
Develop a short list of suitable buildings and pursue them simultaneously to create a competitive environment where landlords or sellers will want to compete for your business.
The practice also will create various alternatives for you that will remove the emotion of focusing only on one property.
Allowing a tenant representative, who has access to market trends, pricing and comparables, control this process will provide maximum negotiation leverage to yield the best deal. By analyzing each scenario, your broker will be able to give you an objective point of view.
Items addressed in the negotiation phase include
- lease or purchase terms
- rental rate and additional expenses
- owner’s construction contribution
- options to renew, expand and purchase.
Have your broker help you perform a comprehensive financial analysis to determine which opportunities are the most cost-effective over the long term.
Size of available units, lease prices, common area and “add-on” expenses will vary and a financial analysis will allow for an easy comparison of properties.
Commercial Real Estate Group of Tucson specializes in representing tenants and corporate users across the United States, Latin America, Europe and Asia as a member of ITRA. For more information call 520-299-3400.