One of the biggest decisions a small business owner can make is choosing a space for their business. There are many factors to consider, from hiring a real-estate broker to finding the right location and price. Experts advise business owners to consult with a broker who is experienced in commercial real estate and familiar with the area.
“You have to interview, if you will, a broker, and have a sense of comfort with his competency,â€ says Bill Armstrong, Treasure of the National Association of Realtors, who has over 30 years of experience in almost every aspect of commercial real estate. “I think you can meet with them and find out what they know in really short order.â€
Owners need to determine how much space they need to operate. While it’s normal to want to rent a bigger space than currently needed, with room for future expansion, Armstong cautions against this and tells owners to be realistic.
“Don’t take on more space than you need. That’s critical.â€
If you lease more space than your company currently needs, your monthly rent could consume a huge part of your bottom line. Before signing a lease, owners should have a real-estate lawyer review it. Armstrong says watch for additional costs added, such as utilities and common area maintenance (CAM) fees, which cover the cost to maintain the building.
Also of utmost importance are the terms of your lease agreement. If your business is successful, you may need double the space you originally signed up for. Armstrong says “I might want a one-year lease with a three-year option or a five-year option. If I need to grow, I need the ability to come out of there without a long-term commitment.”
While a longer lease agreement may bring down the monthly cost of your rental, this could come back to haunt a business owner if there’s a penalty for breaking the lease on a space their company can no longer fit or operate in.