Signing a commercial lease? Here are five common mistakes to best avoid.

Business owners all understand one thing. Commercial leases are a severe pain because there are so many moving parts one has to consider, from location to budget. Not only is the process complicated, but unlike residential property leases, commercial leases offer very little protection for tenants.

We look at five critical points every business owner needs to know before signing the dotted line.

Location Location Location!

Choosing the wrong location for commercial real estate can make or break your business. Much like the residential property section, commercial real estate leases operate under the same guidelines, if not more so. Attracting business requires understanding the market you are trying to sell to. The further you are away, the higher the cost of operation will be.

Your location has to cater to the fundamental needs of your business. Ask yourself - Is there easy access to highways? Is public transportation close by for both potential customers and employees? What sort of market are you looking for? i.e., passing foot traffic vs a more exclusive selection of clientele? You may have a favourable commercial real estate lease, but location always trumps this.

A misunderstanding of your space

With more and more people working from home, enjoying flexible work hours and operating through either remote or hybrid workspaces, it may not always be easy to judge just how much property space you require for your commercial real estate.

The breakdown of the actual dimensions can also be tricky, as not all landlords use the same criteria. Some may only measure from inside wall to inside wall, while others may include the depth of the wall in their measurements. Some may consist of communal spaces while others will not. It may seem trite, but it's essential to know.

The layout of the property space is also vital. Some spaces may be fully built out, while others will require extensive modification. One must have a flexible budget before getting into commercial real estate. Finally, ALWAYS ask about the signage; limitations on display may cause issues for businesses that work off high visibility.

Missing hidden costs

While rent and renovations are the significant costs you'll have to factor in, they are in no way the only ones you'll need to worry about when leasing commercial real estate. One major check should be whether or not your rates, maintenance, and repair costs are the responsibility of you or your landlord. 

You can also check your property lease for additional clauses on rental escalation and whether or not those costs are reasonable and market-related. Remember, a good opportunity today does not mean it will stay that way months down the road.

Neglecting your rights protections

Disputes and tension between tenants in commercial real estate happen more often than expected. Essential protection is ensuring a clause in the contract that speaks to mediation between two parties and provides that issues do not end up in court.

Another crucial element is ensuring a clause that protects you and your business from competitors setting up shop on the same property. It's hard enough having to set up two similar stores next door to each other, but you would probably have an issue setting up your new cannabis store next to a Narcotics Anonymous meet-up.

Failing to negotiate

Before you even consider the clauses and the ideal commercial real estate location, you need to be able to negotiate. There is always wiggle room regardless of how a property lease is presented. You have to remember that commercial property leases differ from standard documents.

Landlords of commercial real estate generally have the upper hand in representation and access to property professionals, so always be aware that they have their own interests in mind during negotiations.

Recently, the buyer's market has placed tenants in a better position to negotiate, so take advantage of the opportunity to secure a deal that serves your interests. If experienced property practitioners like our team supports you, you'll have all the necessary expertise to secure a lease agreement tailored to your business needs.

Contact Ikonic Real Estate today.

For Real Estate professionals you can trust and rely on for industry-related expertise, contact us below for more information.

If you are looking to live in Silver Lakes Golf and lifestyle Estate, Silver Stream Estate, Lombardy Estate & Health Spa, The Ridge Estate, Six Fountains Estate, or Willow Acres Estate and surrounding areas, then Ikonic Real Estate is your preferred property practitioner to assist you in all aspects of the selling and buying process.

Office Number: 083 452 5599

Cell Number: 083 452 5599

Email: martin@ikonic.co.za

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