Whether you are transitioning to a new office or leasing one for the first time, the whole process can be stressful. There are a wide range of logistics to work out, and there are feelings of uncertainty in many cases. That’s especially true if you’ve gone into leasing an office space hastily and without asking the right questions.
- What is the quoted rental rate on the office space?
- What is included in the rental rate?
- Will you provide the space rent-free?
- What percentage will I have to pay on common areas?
- Will you pay for improvements?
- Ask who the other tenants are
- Is there an extra parking charge, and what’s the parking ratio?
- Is the building for sale?
However, there are questions to ask that can provide you with the necessary information to make a wise decision about whether you should rent that workspace or not. After all, you want to ensure that the office space is suitable for your business’ needs and that you’ll be able to have a cordial relationship with the landlord.
With that in mind, here are some vital questions to ask when leasing office space.
What is the quoted rental rate on the office space?
In many cases, you can go online and take a look at office spaces for rent. You’ll see rental prices listed on most. However, all too often, the prices you see are out of date or entirely wrong. You need to be sure that what you see online is actually what the landlord is asking. Moreover, you should ask what the landlord includes in that rental rate.
For instance, find out if it covers things such as:
- Operating expenses (i.e., common area maintenance, taxes, and insurance)
- Janitorial services
- Electricity
What is included in the rental rate?
To get a bit more specific on a few things mentioned above, you should ask if the rental rate covers those things because, in some buildings, it does, and in others, it doesn’t. For example, some freestanding commercial buildings will require you to cover the costs of all HVAC replacements and repairs. But again, you won’t know what’s what unless you ask.
Once you’ve asked, be sure to get the response in writing. You need to know everything that’s included in the rental price so that you don’t get stuck with extra fees that you thought were included but weren’t.
Will you provide the space rent-free?
Of course, that question sounds crazy. But you’ll never know unless you ask. Besides that, you actually can get some commercial spaces rent-free, at least for a time, if you’re paying for significant improvements out of your pocket. So, if you’re willing to negotiate, in some cases, it’s possible, and you might be surprised at what you’ll get.
What percentage will I have to pay on common areas?
Many people don’t realize that you’re not just paying rent on the space that you use. You’re also paying rent on “common areas” like bathrooms, lobbies, and hallways. Typical percentages in commercial buildings run anywhere from 17% to 21%. The point here is that you want to make sure there isn’t a ton of common area in the building you’re wanting to rent. (The more there is, the more you’ll pay.)
On the other hand, if you’re leasing in a flex office or freestanding building, you may only pay for space you’re actually occupying. Always, always ask.
Will you pay for improvements?
As previously stated, sometimes you can make deals where you don’t have to pay rent if you’re the one making serious improvements to a building. On the other hand, there are commercial spaces where you pay rent, and the landlord also expects you to pay for any upgrades you’d like. Some will meet you in the middle, though. You pay the rent, and they’ll pay for agreed-upon improvements.
However, in many cases, landlords will provide an allowance for improvements only if you agree to sign a three to a five-year lease. Suppose you can only agree to a period less than that. In that case, you shouldn’t expect the landlord to be enthusiastic about making improvements at all.
Ask who the other tenants are
If you’re concerned about competitors operating out of the same building, you should ask who the other tenants are. It can also be to your benefit to know if complementary businesses are renting space in the same building.
Is there an extra parking charge, and what’s the parking ratio?
No commercial building wants tenants overparking. The vast majority allow tenants to have three to four parking spaces for every 1,000 square feet they rent. Therefore, you’ll need to do a calculation to see how much space you should rent to get the parking spaces you need.
Additionally, be aware of the fact that there is a growing trend for employees to work from home. In that case, you may not need as many parking spaces as you think.
Is the building for sale?
Knowing if the building is for sale or not can play an important role in negotiations. For example, if the landlord is selling, they may be willing to offer allowances for improvements, etc.
At the same time, take into account that there are plenty of other questions you should ask. Therefore, you may wish to consider hiring a real estate attorney go over any lease before you sign it. Remember that your realtor may not know much more than basic terms like length and price. Moreover, a real estate lawyer can help you avoid oversights and mistakes that could significantly cost you.
