Comments on: Commercial Leasing

Question: Commercial Leasing

SpecialK — Thu, 31 Mar 2005 15:13:59 -0800

Any commerical leasing people in the crowd? I'm about to lease office space for the first time, and I'm not sure how to go about it or what the lingo means.

I understand the service level, like triple net and full service, and I understand that just about everything is negotiable. However, I don't know what the arrangements are between leasing agents of various types and how to do things without stepping on someone's toes, and I don't understand what the difference between Class A, B, and C is.

I do know that I need approximately 800 to 1000 square feet, that I need it to either be wired for ethernet already or to have a TI allowance for them to get it all wired with power and ethernet, and that telecom already has to be run up to the building. I need one enclosed office and one conference-room type space, and the rest of it needs to be open. I've also identified a general area and particular buildings I'd like to be in.

I also have one leasing agent that I've been talking to whose last office was leased out while we were talking, but he's offered to do listings lookups and act as a representative for me -- reassuring me the whole while that I wouldn't owe him anything, the landlord pays him. I don't know if I really need his services or what a potential futre landlord's opinion of someone else getting involved is, especially if they already have a leasing agent. (One of the leasing agents of one of the buildings I'm looking at is also a client, so I -really- don't want to piss him off.)

Also, what will I need to provide proof of ... such as financial backing, revenue streams, finaical statements, etc.? My company's very young, so there's no real credit history and revenue stream wasn't great until the past two months because it was just me and I charged accordingly..., but I've finally got the momentum to grow, ... as soon as I get a few more pepople on staff... which requires the space to keep them...

By: skwm

skwm — Thu, 31 Mar 2005 16:17:55 -0800

One difference: For Class A space, you will be billed on actual electrical usage. For the others, you will most liekly be billed a flat monthly fee based on square footage.

By: cillit bang

cillit bang — Thu, 31 Mar 2005 17:43:59 -0800

This Joel Spolsky article might be useful.

By: pwb503

pwb503 — Thu, 31 Mar 2005 17:59:11 -0800

Class A, B, C, etc are all relative and change with the times. A is the best but in my opinion too nice for a place I'd ever feel comfortable working in.

Get ready to give them all the financial details you could possibly have. They're the ones in power here and you're going to have to jump through their hoops. They don't have to rent to you and can get someone else in there with several years of operation under their belt so get ready to proove you're in it for the entire length of the lease. You might think you're going to outgrow your place pretty quick but it's better to get a decent length lease for a few years, no longer than three in my opinion, then get a bigger place now that you might not actually need. Why? Get ready (for you and any other officers of your corporation) to sign a "guarantee" whereby they can come after you and all your assets if the company goes belly up. You probably won't have to do this after you've been established for a few years, but for the first lease or two it's pretty common in my understanding.

Additionally, you in the square footage you're looking for, you probably will not be able to find a lease shorter than 3 years. Just get ready for that. You'll probably be able to sublet it out to someone if you need to move out, and if you cannot do that, then "everything's negotiable" including getting your next landlord to buy your old landlord out so you don't actually have to pay for those unused months when you move out before the lease expires. This is somewhat common I understand too.

Oh yeah, get an agent. It can't do anything but help and they do not charge you a dime. The owners deal with them all the time and when someone comes along without one, it's like walking into a place with "SUCKER" tattooed on your face. Besides, you'll eventually need one you can trust when the time comes to move up and negotiate that buy out I told you about above. Better to find out if this is your guy now with this small lease then to not know come that time. Trust me, get one, they'll open a lot more doors and help you out.

Email me if you have any other questions.

By: hsoltz

hsoltz — Fri, 01 Apr 2005 10:55:16 -0800

Keep in mind: 800-1000sf is small potatoes in the commercial world. This can work both to your advantage and against it. On one hand, you are able to take a smaller space or sublet that may have been carved out of another, larger deal, and you are probably more flexible than many commercial tenants in terms of timeframe and build-out needs. On the down side, this is a tiny deal for most brokers, and you are likely not to be their first priority.

I agree with pwb503 - work with a broker if you're looking at real commercial space. It's in their best interest to find you what you need. And without a doubt, get an attorney. Commercial leases are at least 40 pages long, and some so thick that they come in binders. You are *not* going to want to review that without some serious legal mind(s) on your side.

On preview: Read the Joel Spolsky article mentioned above. It'll still be difficult outside of NYC, but nowhere near as difficult as it is here!

By: SpecialK

SpecialK — Fri, 01 Apr 2005 11:43:22 -0800

Article read. Thanks for the info about the broker ... I'm very used to working with "good ol' boy/buddy/neighbor" arrangements with various business deals, and I'm very active in the small business community in my area... but I think I'll have to get a lot of professional help on this deal.