What do I need to know to lease a commercial real estate space?

January 12, 2009 3:29 PM

How do I lease commercial real estate?

So i'm looking at leasing some commercial real estate in my area (north Georgia, USA). I have a rough idea of how much square footage i'm looking at, and the price for that square footage appears to be $20/sqft. Is that a monthly cost, in your experience? Does it seem too high or too low for a newly built retail center (e.g. strip mall)? What are some data and statistics I should be interested in when shopping for space? What are some common questions you might ask a leasing agent if you're interested in a space for a food service/cafe/coffeehouse type role, outside of zoning? What are the common credit requirements?

posted by arimathea to work & money (7 comments total)

Have a friend or 'friend of a friend' who is a Realtor or licensed real estate professional approach and negotiate for you.
posted by Muirwylde at 4:04 PM on January 12

$XX/sqft is usually per year, so 1000 sqft would be $20,000/12 per month.
posted by tomierna at 4:24 PM on January 12

There is lots of info here and the related articles on the sidebar.
posted by lee at 4:54 PM on January 12

- $20/ft2 should be the annual rent, the total to be divided by 12 and payable monthly
- most commercial property will have additional rent for services shared between tenants (could be maintenance, snow removal, common area lighting, garbage pickup ... whatever) ... in my experience this is approx one-third of the stated rent
- are any parking spaces included? if so, will they be labelled as for the use of your business?
- for food service / cafe .... are the water and power supplies sufficient - you will use much water and some espresso machines, for example, need a lot of power.
- similar with garbage - you may create a lot of garbage / compost which may need pickup more often than other businesses.
- some landlords will give you free rent for the first x number of months, and/or some allowance of $x/ft2 for fit up of the space. This is helpful when starting a new business. This is where a hard-nosed lawyer can come in useful in terms of negotiating.
- you mention this is newly built space. Be really clear what the builder/owner will do, and what you will have to do ... power, heat/AC, bathrooms etc etc etc. We opened a store in a newly built space in 2007 and it was a nightmare because there was construction going on all around us while we were trying to fit-up / open the store.
- how long is the lease? If they want 10 years, are you comfortable with that? Can you negotiate 5 years + an option for another 5?


Feel free to mefi/email with questions - the above is just what leaps to mind.
posted by valleys at 5:05 PM on January 12

Will HVAC maintenance/repair be your problem or the landlord's? What are the response times?

What is foot traffic and road traffic like during what you expect to be your business hours? Is your sign visible from the road? What are the restrictions on signage? What sorts of hassles do the local government people like to thrust upon you?

Talk to other tenants of this real estate company, what problems do they have?

If some building service fails, whose insurance covers it? If the roof leaks?
posted by gjc at 5:21 PM on January 12

For the purpose of comparing rates, Cushman & Wakefield publishes a retail report for Atlanta that details annual rent per square foot in Atlanta submarkets.

A lot of the rate should depend on location, other tenants in the shopping center and traffic counts. It should be a buyers market for retail space. You want to ensure you are not moving into a new shopping center that will be 50% vacant.
posted by Andy's Gross Wart at 5:25 PM on January 12

Landlords will typically have a standard lease that will have negotiable points (TI-tenant improvement, HVAC rates, parking, overtime air, etc. which is exactly why you will need to get an independant licensed broker to act on your behalf (to negotiate the above points and explain it all to you). Check the property's parking ratio b/4 you lease, I've seen some great properties ruined by not having enough parking for the type of tenants they put in. I've even seen some retail leases that include a % of gross sales from tenants. IMO, I don't think you need a lawyer for such a small lease, because a good ind. broker is paid to negotiate on your behalf. no, i am not a broker.
posted by MuckWeh at 5:51 PM on January 12