Moving your business

Tips on negotiating a lease agreement

Q: I’m in the market for new office space. What do I need to know before signing on the dotted line?

A: If you’re searching for new office space, compare the costs and benefits of various properties before it’s time to negotiate a lease, says Wendy Habisohn, director of operations for Joseph Real Estate Services Ltd. in Northbrook, Illinois, which specializes in developing and managing single-story office buildings in suburban Chicago. To secure good space at favorable lease terms, the small-space (500 square feet to 2,000 square feet) renter needs to ask the right questions. Consider these points:
Find a broker who specializes in small-space tenants. They will help you decide what your space needs are, find property within your budget to meet your needs and explain the long-term effects of your lease agreement.

Consider a building that has more small tenants than large because you’ll have more bargaining power. One-story office buildings also have much less loss space (hallways, reception areas, elevator shafts, bathrooms) that you and other tenants pay for proportionately as part of your monthly rent. One-story buildings may also allow you 24-hour access or the ability to control both heat and air conditioning in an individual unit.

Once you’re ready to look, be prepared to ask these key questions before signing the lease:

  • What is the square footage of the office?
  • What is the loss factor?
  • What is the rent per square foot?
  • Is the rent gross or net? (Gross rent is comprised of the base rent, real estate taxes and operating expenses, and sometimes includes utilities and janitorial service. Also, you, the tenant, may be liable for any tax increases and/or operating expenses over a specified dollar amount. Net rent, on the other hand, consists of the base rent alone. Also, you, the tenant, are responsible for taxes and expenses. Be clear about how the rent is being quoted.)
  • Will electric utilities be individually metered?
  • Will the windows be washed? How often?
  • Is a full-time maintenance staff available or do you need a maintenance contract?
  • For how many years can the space be leased?
  • Are options available to enlarge or decrease your space?

Once you’ve done your homework, selecting the right office space will be a piece of cake.
E-mail your questions about small business to gallopg@blackenterprise.com.

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