Leasing commercial space to a new tenant? It’s no accident you are here.

If you are a commercial property owner or landlord searching for best practice tips and advice on leasing commercial space to a new potential tenant, you are in the right place.

By the end of this article, you will learn exactly what you should do to protect your investment and ensure you are netting proper returns on it consistently.

And that’s what you really want out of owning your commercial property…isn’t it?

What makes me qualified to advise landlords on how to lease out commercial space?

I work as an agent in the commercial real estate brokerage industry, and one of my specialty areas is in helping property owners lease out their commercial space. My team of commercial property specialists and I help business owners make smart real estate decisions that grow their business.

Here is a handy list of important tips I recommend every commercial property owner and landlord should know before they lease their retail, office, or industrial space to a new tenant.

I’d recommend printing this article and taping it to the wall in your workspace where it can be a handy reminder to you the next time you’re thinking about leasing out your commercial property.

5 Important Things Every Commercial Property Owner Must Know About Leasing to New Tenants (Advice from a Commercial Real Estate Agent)

1. Know the market for your type of commercial space for lease

I’ve seen what happens when commercial property owners think they can skip this vitally important first step.

It usually looks something like a stressed out owner with a vacant commercial property just sitting there with no tenant.

They are very emotional about having to pay all the expenses and taxes out of their own pocket.

Do you want to avoid that unpleasant scenario when it comes to leasing your commercial property to a new tenant looking to expand their business into a new location?

I’m sure you do, otherwise you probably wouldn’t even bother reading this far.

The bottom line: there is no skipping this CRUCIAL step if you want to get your commercial space leased to the right tenant who will pay their rent and net your profits for the long-term on your commercial property investment.

How to attract a highly qualified tenant to lease your commercial space 

If you want to present a fair lease opportunity to the market that attracts a qualified, high quality, long-term tenant who will net you more money and be less of a headache, then you need to know everything you can about the commercial leasing market for your type of property.

That means knowing information on comparable commercial properties for lease similar to yours, such as the rental rates and square footage measurements of available properties that your potential tenants are also looking at.

Also, would you know off the top of your head the vacancy rate for commercial properties in your area?

Leasing out an office space?

You better know how much office space is leasing per square foot in your area.

Got a warehouse for lease?

You’ll also want to know comps on how much other warehouses are renting per foot.

If you make the fatal mistake of thinking all commercial properties have the same vacancies and leasing costs, well I have news for you: you’re wrong.

So what can you do about making sure your commercial property is leased to the highest quality and best tenant for your type of space at a fair price?

Well, keep reading this article for one thing. You know what they say about knowledge and power.

But beyond getting educated on your commercial property type is having the good business sense to work with a commercial leasing agent when leasing commercial property as a landlord or even as a tenant.

For more information about why you should work with a tenant representation agent when leasing commercial property as a tenant, check out: 5 Reasons Why Using a Tenant Rep To Lease Commercial Space Is a Smart Business Decision

A good commercial agent has access to all this useful knowledge and will handle the leasing transaction for you from start to finish, including the marketing, showings, lease negotiations, and key transfer.

For the amount of specialty work and time a good commercial real estate agent will do for you to handle the lease of your commercial property, their fee (which is typically a percentage of the aggregate rent paid by the new tenant) is well worth the time, energy, and effort you would need to spend on finding a new tenant for your commercial space.

Let me put it another way…

When you need a vital organ transplant, do you do it yourself?

Or do you trust a trained, experienced, and knowledgeable expert in the medical field to handle such an important operation?

Don’t leave something as big as your leasing commercial property up to chance

Set yourself up for the best chance of getting your property leased out or sold by working with a qualified and experienced commercial real estate agent, preferably one who is also backed with a knowledgeable and experienced team of commercial property specialists and research staff.

2. Know your prospective tenants who would lease your commercial space for their business types (retail, office, industrial, etc.)

After your commercial leasing agent of choice begins marketing your commercial property, you should be hearing from potential tenants interested in moving into the space.

You’ll want to first familiarize yourself with their business, which you can do by requesting their financial information regarding their business in order to evaluate their ability to make lease payments on the property. It is to your advantage as the property owner to ensure they have a steady and positive long-term cash flow.

Next, you’ll need to learn more about what they require once they are in the space, such as:

• The type of signage they’ll want on the property
• If it’s a retail business, what kind of foot traffic do they typically see coming into the store and is that possible in this location?
• What kind of tenant improvements (or “T.I.’s”) they would like to apply to the space and how this will be paid for (e.g. free months rent, etc.)

Keep in mind that the potential tenant for leasing commercial space from you will be doing their own due diligence as well, but the more information you gather to determine the viability of their business, the more you should feel comfortable in moving forward with this viable tenant.

 

3. Know your commercial zoning and commercial real estate property tax situation

When leasing commercial property, it is also imperative that you know the zoning for your space.

These zoning laws may change regularly depending on how business and populations are developing and evolving in your area, so it’s a good idea to keep up to date on what types of tenants are allowed according to the zoning and what regulations are enforced.

Of course, your commercial agent should have access to this information, but it’s up to you the landlord to be proactive and constantly aware of what’s happening with your commercial property investment to keep it profitable to own.

What happens if you lease to a tenant that your commercial property is not zoned for?

If for some reason you were to lease your commercial space to a tenant that your property is not zoned for (which should never happen if you are working with even a semi-competent commercial real estate agent as your leasing representation), then you run the risk of facing stiff fines from your municipality.

And why would you want to give your government any additional money beyond what you already are paying?

How does that make good business sense?

It doesn’t (right?)

That’s why it’s super crucial for landlords and property owners to know the tax situation on the commercial property, especially in this era of ever-changing tax codes and regulations.

Your commercial agent helping you to lease commercial space should be able to find out more information on changes in local and state taxes each year.

Plan this right, and you’ll be able to do solid budget planning or file for the right deductions to ensure you aren’t paying too much in taxes (or too little).

How much you are paying in taxes may have an impact on any changes in rents you would charge your tenants to lease your commercial space.

Plus, if your commercial property requires any sort of special equipment (such as a commercial HVAC system or other essential business services like business phone systems, wireless, security, and merchant services), these purchases may have a major impact on your tax filings.

 

4. Know the latest technology for your type of commercial property for lease

In the commercial real estate industry, the term “functional obsolescence” applies if a commercial space is unable to function in the same way it was originally intended.

For example, an old industrial warehouse building, a load-bearing wall may be situated in a place that limits the type of storage options or function a particular part of the structure might house.

Another form of functional obsolescence might be a now-obsolete technical system in an office building that has higher operating costs than income.

These days, many tenants require high speed cable Internet and wi-fi connectivity in order to conduct business efficiently.

It is up to the landlord and commercial property owner to retrofit these required updated features in order to attract high-quality, long-term tenants to lease the commercial space.

 

5. Know how to handle asset and commercial property management

Depending on your commercial property type for lease, you may also require the services of an asset management company to advise on a multitude of important issues that arise when leasing commercial space.

These can range from keeping updated on market knowledge for your type of commercial property to making important decisions on improving the property with upgrades, regular maintenance, monitoring financial progress of tenants, and actively staying on top of all upcoming lease expirations and extensions.

Asset managers can also oversee major renovation projects like parking lot upgrades and building expansions.

Another benefit of working with an asset manager is having regular sustainability and energy usage audits, further increasing your bottom line and preventing major costs and headaches down the road.

Some commercial property owners may also act as their own property managers, handling day-to-day maintenance, inspections, service requests from tenants, rent collections, and other essential functions to keep the commercial property functioning efficiently.

Depending on the amount of time, energy, and resources needed to handle property management, many landlords and owners opt to instead outsource the work to a property manager who specializes in that type of work for a percentage of the monthly rent collected as a fee.

Conclusion

If you are a commercial building owner or landlord thinking about potentially leasing commercial space including retail, office, or industrial property to a new tenant, these tips are the major considerations to be aware of.

However, it is worth it to partner with an experienced and knowledgeable commercial real estate agent.

When you hire a commercial real estate agent to handle your commercial leasing of your property, you are entrusting your business with a professional who has your best interests at heart to directly handle the marketing, showings, and lease negotiations.

This will ensure you are covering all the important steps to set yourself up for the highest chance of having a successful commercial lease transaction a high quality long-term tenant.

And that’s what you really want…isn’t it?

This work is licensed under a Creative Commons Attribution 4.0 International License.