Lease Agreements: How to Secure Your Company’s Ideal Space

Location, location, location. What does your address say about your business? Where are your customers? How can you leverage your office space to attract the best people?

Your company's business is perhaps the determinant of its site, especially in verticals like retail, gas stations, food and beverage, health and beauty services. Whether you're looking for a restaurant, warehouse or office space, physical position is crucial to the operational efficiency and profitability of your business.

Not enough commercial real estate space

The commercial real estate market always has winners and losers. The post-lockdown rebound period has been especially profitable for the retail real estate sector. According to the National Association of Realtors, demand for retail space has been positive for seven straight quarters as of Q3 2022. Also, the absorption of available commercial property in the office and industrial sectors has grown since the US economy reopened. A strong 2021 rebound in the commercial real estate market indicates stiffer competition for prime locations.

Warehouse market pushes out tenants

There are instances where tenants could be negatively impacted by a landlord's underlying business. For example, warehouse operators favor tenants with high inventory turnover. An active wholesaler brings in more handling fees for the operator. Currently, finding warehouse space is like finding a container ship — nearly impossible. Operators want higher rates to buffer against uncertainty and lower income from fees, and many businesses are unable to cover the increased inventory cost.

The fraction results in cash-strapped companies that are priced out of warehouse locations offering better facilities, security and convenience to processors or shipping vendors. The Wall Street Journal reported vacancy in the logistics market is 0.7% in cities like Savannah, GA and Long Beach, NY, compared to over 5% in Q3 of 2020. With the upfront costs of signing a new lease agreement, businesses have to weigh paying higher rents and fees with liquidation at reduced prices.

Key lease agreement terms

Lease agreements are critical to ensuring your company's best possible address. Working with a business lawyer familiar with drawing up lease agreements will ensure you receive decent terms. Be wary of provisions that favor the landlord unreasonably. Your lawyer should be an experienced negotiator who's aware of the common mistakes that business owners make hastily securing the ideal space.

The main elements of a commercial lease agreement to be aware of are:

Term clause: Specifies the date a tenant is responsible for paying rent and the end date. Also covered are the lease renewal details.

Common area and maintenance clause: Delineates what and how much a tenant is responsible for CAM expenses, which could include building and property maintenance fees, management salaries, utilities, property lighting, parking lot maintenance and administrative fees.

Use clause: Covers how a property can and cannot be used and the safety liability of the premises.

Rent payment section: Describes how much, when and how to pay the rent as well as annual increases.

There is more to a lease agreement than we have time to cover. Commercial lease agreements need an experienced real estate attorney.

Contact the Law Offices of Donald W. Hudspeth P.C online or call us at 866-696-2033 today.

Categorised in: Starting a Business in Arizona

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