In the world of commercial real estate leasing, there are plenty of hoops that investors and business owners must jump through and navigate. However, should you go into the process with a clear mind and strategy, you can potentially set yourself up for long-term success.
In a conversation with commercial leasing expert Meagan Omara of HM Commercial Group, host Dustin Serviss discusses several key considerations that come with commercial leasing success:
2 Things Considerations For Negotiating A Lease
Imagine that you are a business owner looking to expand your company and you need to negotiate a new lease. According to Omara, there are two key aspects to consider when coming to the table:
1. What Is Your Strategy?
There is more to a lease than simply the price. When you are negotiating a lease agreement, make sure you know the strategy that you are bringing to the table.
Ask yourself these types of questions:
What are my long-term business goals?
How will the landlord receive and pay rent?
What do I need to ensure to make sure my future is protected in this space?
2. Make Sure You Have Rights To Renew
Leasing is a form of investment. Make sure that when you approach the lease renewal discussion that you have built-in contingencies that will allow you to renew the lease in the future.
Failure to keep these details in the negotiation may leave you with few options when the lease runs out.
2 Key Considerations For Taking On A Tenant
Are you taking on a new tenant in your commercial property? When negotiating leasing with a new tenant, Omara has two more considerations to keep in mind:
1. Calculate Your Net Effective Rent
If you are going to ensure that your tenant offers long-term investment returns, you need to calculate your net effective rent. This is the rent you are collecting over the term of the lease. You will then compare that to the costs of operating the property. This will give your expected return.
2. Negotiate Your Financial Covenant
Signing a new tenant can bring you a sigh of relief. However, don’t miss the finer details in an effort to fill the space.
Make sure that you know the details within the financial aspects of the lease. As you engage with a new tenant, ensure that the lease is guaranteed with plenty of contingencies should the deal go sideways unexpectedly. This can save you a load of headaches if the tenant turns out to be less-than-perfect.
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