- Thinking Space is a Commodity – In commercial real estate, square feet
are not created equal. Load factors, functional obsolesce and poorly laid out floor plans can quickly diminish actual value to the tenant. - Thinking Rent Is an Absolute Measure – There are a lot of factors to consider when comparing price per square foot. Electricity, Janitorial Expenses, and Common Area Maintenance charges are just SOME of the factors that come in to play. Full service (Gross Leases) are supposed to include all expenses. In triple net leases, all expenses are passed through to the tenant.
- Not Understanding Rentable vs. Useable Square Feet – Useable Square Feet (USF) is the space within the walls of your unit. Rentable Square Feet (RSF) is USF plus common area space that is outside of your suite, but is accessible to and from your space (i.e. hallways, corridors, bathrooms, foyer, etc). In office space, there can be a significant difference between USF and RSF. With a free standing building, the difference is negligible. It is important to know, because a lot of common space can be of no use to you or your business, but yet you pay for it on a monthly basis.
- Not Planning for an Exit Strategy or the Future – What happens if you have to leave the space before the end of the term? That rate that was negotiated for 5 years might not seem so great if you have a hiccup in your business and need to downsize. Negotiating a shorter term lease might have made the rent more expensive in the short run, but limited your downside expense in the longer term. Clauses that allow for subleasing can mitigate risk. What about if your business out grows the space? Can the landlord accommodate your need for additional space without you having to break the lease?
- Not Allowing Enough Time – If you wait until the last minute to search for a space, not only will you have trouble finding that perfect space for your business, but by waiting, you transfer negotiating leverage to the landlord.
- Not Utilizing a Professional Team – Unless you are in the real estate business, you probably only become familiar with the market when your lease is up or you acquire more space. Attorneys, commercial real estate brokers, architects, and insurance agents work with real estate every day. They can assist to guide you away from some very expensive mistakes.
- Poor Site Selection – Location, Location, Location ….its not just about being situated in a visible location for your clients. Ingress and egress should be considered as well as distance from your employees when selecting property.
- Not Paying Attention to the Fine Print in the Lease– Do you understand how the landlord is calculating Common charges? Is it fair and reasonable? What about the other clauses, such as parking, access to the building after hours, insurance, use and exclusivity?
- Underestimating the Condition of the Premises or Access to Utilities– How you would like to run a technology company that doesn’t have access to the Internet? Or a flower company housed at a location in which the AC constantly breaks down? Check to make sure that the space can accommodate your business and mission critical features actually function.
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