If the only lease you’ve ever signed is for an apartment, you may not have the expertise to navigate the leasing process for industrial real estate. For many entrepreneurs, it’s actually the second lease – not the first – that can make or break a business. If your business is bursting at the seams and you need a bigger, better space or a better location, you should get an expert in your corner. Why? A bad lease is like a slow leak. Sure, it’s minor now, but with time, it’s going to mean big problems. And unlike a leak, a lease is a legal contract. You need be completely clear on everything in your lease, which is another area a great agent becomes necessary. Either way, here’s what to know before leasing or renewing that industrial real estate lease.
Be Clear on Square Footage
Commercial and industrial real estate leases are usually quoted in price per square foot. It’s not unusual for landlords to recycle lease agreements, and that may mean the actual space isn’t being interpreted accurately. Actually, this concept of incorrect measurements by landlords – often related to remodels, repairs or plain honest mistakes – even has its own term. It’s called “rubber rulers,” and here’s why it matters. By not verifying the space you’re about to lease before signing the contract, you’re at risk of overpaying.
Make sure you understand usable areas and common areas, too. Usable areas are the actual spaces used business purposes, and common areas include spaces like lobbies, hallways, loading docks, etc. In a lease, the rent reflects the rentable areas plus a percentage of common areas, which is often expressed as the “multiplying factor.” There’s usually room to negotiate on the multiplying factor, if a qualified agent is on your team.
Be Clear on Operating Costs
Operating expenses include variables like taxes, maintenance, utilities, repairs, landscaping, etc., are another area to review carefully. Items that aren’t relevant to either your business or your space should absolutely be negotiated.
Take a Hard Look at the Escalation Clause
The escalation clause is commonly used by landlords to pay for increases in the building’s costs. If you’re an inexperienced lessee haggling with a landlord, the potential exists for your rent to increase – a lot – over the years thanks to the escalation clause. That’s why it’s so important to negotiate a cap.
If understanding and effectively negotiating these details seems like it may be best left to the experts, you’re thinking smart. Call us today, and let us explain how we can help you avoid these costly mistakes.
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