Leasing Commercial Real Estate
Is leasing commercial real estate right for you?
The decision is simple for a start-up business and gets a little more difficult for the established business. If you have a growth factor of 20% per year, leasing is probably correct until you have maximized either your ability, market or profitability within your business.
Other reasons for leasing commercial real estate if you are starting a new business; you must relocate and are under capitalized; you are unsure of your market direction or geographic location; or, you are looking at multiple locations.
Leasing commercial property is not unlike leasing a car. In fact, it is more like a vehicle lease than renting an apartment in some ways. Leases have terms and conditions that are totally unique to commercial properties.
An apartment lease is easier to assign or to sublet. An apartment lease typically does not include specialty alterations or modifications where the landlord has participated. Leasing commercial real estate requires more thought about the future and not the moment.
Commercial landlords will have phrases whereby you, your partners, your heirs remain responsible for the lease. Commercial real estate leasing requires a new mindset, like leasing a car. You want to be asking, “will this vehicle serve my purpose for the term to which I am committing? Will my business survive and prosper for the term?
However, leases allow an entrepreneur to operate freeing capital for the business and not the real estate. The rent expense is a straightforward right-off business expense.
The risk is lessened to the term of the lease instead of having a building to sell if your business does not succeed. Leasing is ideal for the infancy and adolescence of a business that does not require highly specialized alterations in which a landlord will not participate.
A mature business is one which has reached a point where business is stable, annual growth is predictable, the operators have systems in place, retirement plans, goals and debt service are in order.
The owners are actually taking longer vacations and the opportunity to sell as a business “opportunity” exists. Or, the company CPA is saying to you, “Its time to own some real estate”.
Leasing commercial real estate is a terrific mechanism to start a company, to test a geographic or demographic model, to add locations rapidly, to accommodate interim spurts in production and for franchise operations.
There is a huge market for leasing or lease property wouldn’t exist.For leasing commercial property, a business owner should be securing a commercial real estate broker at lease 6 months in advance of the need for a lease re-negotiation or a new location.
Trident Commercial Real Estate Company specializes in lease consulting.