NCET Biz Tips: Exploring the space in commercial real estate
Sarah Carmona Zink and Emily Weyrick
As a business owner, there are many variables that need to be considered when searching for space. Even Googling “Finding Commercial Space” doesn’t supply you with tips or recommendations, it shows you tons of listings that may or may not fit your needs and/or may or may not be available.
We see many business owners attempting to navigate this daunting process on their own, when in fact they really need representation to make sure that the process goes smoothly. Having a well-qualified commercial real estate agent to assist a business owner is key. Make sure that your agent has commercial experience and/or commercial certifications. As for certifications, you want to make sure that your representation is a CCIM and/or SIOR. These professionals will help a business owner minimize their risk and make better informed decisions.
After a business owner has chosen a professional to represent them, they will then be deciding if they will be purchasing or leasing a property. If they are in the position to purchase, the client will then decide what financing options are best for their needs. If they need financing, they will once again need to find a lender that understands the business needs and is well versed in the various loan programs (conventional, SBA, microloans).
If they choose to lease a property, the client will have to set a monthly budget as to how much they can allocate toward the monthly rent costs and any other costs that will be passed along to them by the landlord. If they choose to purchase or lease, the client will need to have a clear business plan, three years of financials, and a good credit score to provide to the lender or the landlord.
Furthermore, whether to choose to purchase or lease, there are going to be variables to consider. Depending on your type of business, there can be specific parking requirements, additional water rights that must be purchased, special use permitting, inspections and certifications with local, state, and federal government, zoning requirements, power needs, deed restrictions, and non-compete agreements. We have seen stressful moments when someone on the team fails to do their part correctly. For example, one story in 2022 reported that Raising Cane’s was in a lawsuit in Texas after they entered a 15-year lease and rent resulting in millions of dollars in rent. After the lease was executed, Raising Cane’s found out that the landlord failed to disclose that there was a noncompete clause for selling chicken that was established by a nearby McDonald’s in 1984.
Business owners must take several factors that will impact their business. Location is going to be a big factor when looking for space; they will want to make sure that the location is accessible to the clientele. Then they are going to have to assess the accessibility needs for clients and any vendors that will require delivery to the space. Next, the client is going to want to factor in potential for growth. Then, they will want to make sure the terms of the contract or lease are going to meet their needs; either way they are going to own the space or be locked into a deal for several years and they will be bound under those terms and space.
Moreover, having a good commercial contractor and different inspectors will assist the client in finding needed repairs, design for space, and bids for any proposed tenant improvements that will be needed for the business owner to conduct business.
Every business is unique. Making educated and professional assisted choices is imperative to the success of the business; the wrong contract or lease terms can have huge impacts on the business owner’s future. Choose commercial real estate professionals that will help to make the client’s dreams come true, and not leave them in a blackhole of despair.