5 Steps to Prepare for Signing a Commercial Lease Agreement
Published June 12, 2019. Updated September 21, 2023.
Understanding the mechanics of commercial leases is very important to managing business risks. Business owners must always read the fine print, understand what they're committing to, and plan their exit strategy well in advance.
That said, it's equally important to get clarity around what your business needs, what it can afford, and what it might require from a business rental space in the next three to five years. Simply understanding the leasing process and being prepared to negotiate only helps if you are clear about what kind of office space you'll need and the budget you're working within.
When you have deep knowledge about the commercial office leasing process and clarity about what you need and can afford, you are then fully armed to jump into the deep end of the tenant-owner/landlord relationship.
Let's look at five key steps that will prepare you and your business best for signing the strongest possible lease for a space that will meet your current and future office space needs.
1. Align Your Office Space With Your Business Plan
If you don't have a business plan in place, go back to start. You're not ready to commit to a long-term lease yet.
To get clarity about what you need, you must have a plan for your business that is documented, peer-reviewed, and ready to execute. Once you have a plan, or if you already have a business plan, use it to determine your office space and commercial lease needs.
After all, your office space is a tool for achieving the goals laid out in your strategic, long-term plan.
2. Gather Your All-Star Team
There's no need to rely on your own intuition to choose the ideal office lease space. Bring together people you trust and form an office space working group.
This team can be populated by trusted mentors, advisors, and key members of your business' staff. Eliciting the views and opinions of others can help you reduce commercial lease agreement risks and help you avoid making decisions in a vacuum, which can be dangerous.
Ask for help, and it can go a long way to increasing the probability that you'll find the perfect office rent space and a practical lease agreement that protects your interests.
3. Game Out Your Ideal Space
With your all-star team, map out several different office space scenarios that align with your business plan and office culture.
Do you need an open-floor plan or private offices?
How many conference rooms will you need?
What are your IT requirements?
Is there room to expand should your company need to hire a host of new employees?
How much usable square footage (USF) do you need now, in three years, and in five years?
Come up with a set of different approaches and then work to a consensus on which is the best. With these goals and details in mind, start visualizing the layout you need in your space for success.
Think "Big Picture" and "Long-Term"
Creating a synergistic relationship between your office space and your business plan is critical for success. A well-designed office can help achieve your strategic objectives and increase employee productivity.
Once your aims are clear and you've found a space that might fit the bill, make sure it can accommodate a design to facilitate your goals and operations. For instance, an open layout may foster team collaboration, while dedicated meeting rooms can be crucial for client interactions. Tech startups may need spaces that encourage agility and creativity, while traditional businesses might require formal settings.
Remember, your office is a physical embodiment of your company's ethos and should reflect that in its design. A well-aligned space improves workflow and can be a powerful tool for branding and recruiting. So, before signing commercial lease agreements of any kind, think about the "big picture" and "long-term" to make sure you're in the right space to thrive.
4. Envision Your Ideal Commercial Space and Lease
Before you enter negotiations with an owner or landlord, like game planning for your ideal office space, prepare for negotiations by mapping out your ideal office space and lease terms.
In fact, setting priorities for both the physical space and the lease contract is essential before initiating any negotiations. You should have a clear understanding of what elements are absolutely critical for your business operations and what aspects you can compromise on.
This means considering factors such as location, size, layout, and any specific amenities or features essential for your work environment. Equally important are the commercial lease agreement terms, which can include rent, duration, renewal options, and clauses for early termination or subleasing.
By having a list of non-negotiables and flexible points, you're better positioned to strike a deal that aligns closely with your business goals. This strategic approach allows you to navigate negotiations more effectively, ensuring that you secure an office space that serves as a solid foundation for your business endeavors.
5. Hire an Experienced Commercial Real Estate Broker
Finding the right commercial property and space to lease is easier with an experienced and helpful commercial real estate broker. Getting to know your landlord and how they work with tenants is crucial to knowing if you should sign a lease with them (or not).
Similarly, a landlord should understand your business needs and goals to help you find the ideal space so your business can excel. Prior to negotiating a lease, you should ask to meet your landlord (if you haven't met them already). Making sure your landlord is a good fit for your business and goals is as important as finding the right space.
At Kenwood Management, we welcome and encourage this early meeting. We want to know about your business and how, as your landlord, we can help you grow and succeed. We believe that building these bonds early leads to longer-lasting relationships. Our goal is to be your landlord for decades, not just the next three to five years.
Kenwood Is Here to Help You Find the Best Space and Commercial Lease Agreement
We know it's challenging to find an office lease space and lease agreement that supports your business goals. Our goal is to make the process less challenging so business owners can find the perfect locations faster and with less hassle.
Our experts want you to succeed in the Baltimore and D.C. areas, and we have a good portfolio of properties that could meet your needs. For more information about Kenwood Management and to view testimonials from our tenants, click here.