FINDING THE BEST AVAILABLE COMMERCIAL PROPERTY FOR YOU AND YOUR BUSINESS
When looking at commercial properties, you should keep in mind that not all commercial properties are the same. Knowing what commercial property is right for you is crucial in finding the right property. Knowing the difference between different commercial properties is also quite important.
COMMERCIAL PROPERTIES
Industrial Park Properties: These commercial properties are often used by heavy industry (for exampling, manufacturing) and zoned as such. These are usually the cheapest of the commercial properties but they don’t have a lot of the access to customers and their curb appeal isn’t as great as other commercial property types. Of course, the businesses that use these properties generally engage in business-to-business commerce and thus don't require those features as much as the other businesses do. However, many business owners may still choose this kind of property because they plan to convert it into something more favourable for their particular business. For example, they may convert a large, open factory into an multi-unit office that they can use for their accounting business.
Business Park Properties: These commercial properties generally have clusters of office buildings or other small/light-industry businesses. These properties usually have lower costs than commercial retail parks. They have more curb appeal and have relatively good access to customers and roads.
Commercial Retail Properties: These properties are most suitable for direct customer sales and include places like strip malls, plazas, large malls, and regular storefront businesses. These properties likely have the best curb appeal of the three property types and the best access to direct customers and roads.
THE PROS AND CONS OF LEASING INDUSTRIAL PROPERTIES
Pros
- Zoning a industrial property to your needs is easier in comparison to other commercial property types.
- Able to increase square footage by building new areas and floors
- Renovation, building out, and other physical changes are easier to do, legally and contractually speaking
- Leases are more affordable and open for negotiation
Cons
- Need to be aware of extra fees like common area fees and maintenance fees
- Less curb appeal than other commercial property types
- Depending on what you want to convert the property to, construction costs may be high due to having to add different systems (such as electrical, heating, plumbing, etc.)
- If your business depends on direct customer sales, you’ll likely have less access because industrial properties are usually out of the way
FINDING COMMERCIAL PROPERTIES
There are many ways to find commercial properties. Checking real estate property magazines and listings in various newspapers are a few of the ways that you can find them. There are also listing in various newspapers. You can also use the internet.
Here are some websites to consider for the Toronto market:
http://www.viewitbiz.ca/
http://www.loopnet.com/Intl/Canada/Ontario/Toronto-Commercial-Real-Estate/
http://toronto.en.craigslist.ca/off/
http://toronto.kijiji.ca/f-real-estate-commercial-office-space-W0QQCatIdZ40
RESEARCHING AND EXAMINING THE PROPERTY
Before searching for properties, it is important to know what it is you're looking for. This may sound obvious but many a time we end up overlooking the negatives of a property because we are so in love with it and aren’t paying attention to what we actually need in a property. If you logically lay out what is important for you, you'll have a much easier time looking at properties and making the decision to lease, rent, or buy. Make sure you detail what are your needs, priorities, and perhaps long-term goals are with acquiring a property. You may run into a property that is excellent but it may not be the best for YOUR particular needs. When looking at properties, just like looking at any big purchase, it is important not to appear too overexcited or enthusiastic. A savvy owner will be able to press you for more if they know that you really want the property.
Here are some things you should consider:
The Property:
- Parking: Is there widely available parking? How much parking is taken up during peak business hours? Is there the possibility to expand parking if necessary? Parking can correlate to the availability of potential customers, so keep that in mind.
- Curb Appeal: Is the property located in a good area? Is it visible to potential customers? Does my particular business rely on being visible to customers or am I doing business-to-business sales (in which case curb appeal isn’t that important)? Are there things blocking the view of the property such as trees? Is it possible to enhance the curb appeal or are there local ordinances that restrict your ability to do so?
- Maintenance: Has the property been well-maintained? Will it require repairs? How much would potential repairs cost? How is the infrastructure surrounding the area?
- Handicap Issues: Is the property handicap accessible? Does it offer a route for wheelchairs? Is it up to the specifications required by the government?
- Safety and Insurance Issues: Is the property safe? This overlaps with a lot of different areas but, in general, is it legal and safe to operate from the property? What is the situation with insurance? What are the rates and what type of insurance is required? Is the property able to pass any safety tests the government may issue? Is the property up to regulation or will you have to pay to get it up-to-date?
- Restrictions: Does the property have any restrictions? Many properties can have advertising, operational, safety, and zoning restrictions to take into consideration.
- Feasibility: Does the property require a feasibility study? Is there something wrong with the property (such as a gas leak) that will require (perhaps costly) additional testing? Will you remain on the hook for such costs? Can you get a hold of any previous studies done on the property to get a better picture on the property?
Real Estate Terms:
Consider getting up-to-date with the real estate lingo as you’ll likely run into them. Here are a few links that you can visit: http://www.cfcre.com/glossary.htm or http://www.realtor.org/NCommSrc.nsf/files/Commercial%20Real%20Estate%20Glossary.pdf/$FILE/Commercial%20Real%20Estate%20Glossary.pdf [PDF]
THE DIFFERERENT KINDS OF COMMERCIAL LEASES AND REGULAR LEASING TERMS
Types of Commercial Leases:
Lease: The standard lease has you as the business or individual named on the lease with the landlord.
Sublease: A sublease is when another business or individual already has a lease but further leases the property (or a portion of the property) to you.
Advantages and Disadvantages of Subleasing:
Pros:
- You do not have to lease a large, expensive area and, instead, can get something smaller and more appropriate to you
- If, after some time, you require more space, the possibility may exist to take the whole lease from the person or business subleasing to you
- The possibility of free amenities such as alarms, guards (possibly), and/or internet.
- Less legal red tape
- Business synergy, networking, and possible cross-pollination of ideas as you will likely exist with other businesses
- Less responsibility for the property in terms of extra and hidden fees as the original leaser is on the hook for it
- Possible access to greater in-house support that is covered in common
- Generally less expensive and less hassle to get
- The property could possibly be ready immediately and come with furnishings and other benefits
- Access to a common area with shared costs that are spread to everyone
Cons:
- If the original lease terms are unfavourable, the leaser may pass on those problems and fees to you, the subleaser
- Less maneuverability in terms of being able to use the property the way you want to
- Repairs and maintenance problems will have to go through the person or business you are subleasing from and, as such, may be subject to delays.
- Shared space means less influence for your business compared to if you had your own place
- If the person or business you are subleasing from is unable to uphold their lease (by, say, being unable to pay their lease), they may lose the lease and you may also be ejected or face other problems
COMMERCIAL REAL ESTATE LEASES: COMPREHENDING THEM AND SUCCESSFULLY NEGOTIATING THEM
Although you may have experience with residential leases, you should know that commercial leases and residential leases are quite dissimilar. As such, there are many questions that you should ask and many things to consider before taking the leap.
Knowing the type of commercial lease that is available is highly important as it can often make the difference between getting charged a high rent and a low rent. Some financing options may also be more favourable for you in comparison to others. So, it is important to know which commercial lease type would be the best fit for your business.
Being able to negotiate regarding your lease is also important. Like all contracts, leases are generally able to be negotiated. Of course, this would depend on your landlord. It is entirely possible that they will not be willing to negotiate and, instead, give you a flat, upfront contract that they'll ask you to sign. This puts you in a disadvantageous position as you'll have to accept whatever terms he or she has put forth. Still, you should always attempt to negotiate because after the contract is signed, you'll be held to it.
Knowing what fees and costs are associated with the lease is also crucial. Knowing your rent is just one part of the lease equation. There are also many other fees such as utilities fees (and how they are calculated), various kinds of taxes, various kinds of insurance, and many other open and hidden fees, that you’ll need to take into consideration. At first glance of a property, it may be the case that you think that you've found the perfect property. But, after paying close attention to those extra fees and costs on the lease, you may come rethink the viability of acquiring such a commercial property.
NEGOTIATING FOR A COMMERCIAL PROPERTY
Once you've found the property you'd like to lease, the time for negotiation occurs. When negotiating, always remember that the initial offer from the landlord is more often than not inflated. You'll need to be ready and willing to ask for better terms and/or a better price.
Try to get the asking terms in writing from your potential landlord. This will help you to get a better picture of what kind of lease you are getting and for what price.
If the property you're looking to lease or sublease has a common area, you can expect to pay some fees for it. When negotiating Common Area Fees, know that you have some leeway to get a deal. Be prepared to negotiate and bargain for a good deal.
When preparing an offer, remember that you should be convincing the landlord why you and your business would make a good tenant. A landlord may be willing to give you better terms over someone else if you're likely to pay on time and not be a hassle. If you are offering your own terms, be clear about what you expect and what concessions you'd like them to make. Sometimes to consider including are the monthly rent, the length of the lease, maintenance considerations, and fees.
FINAL THOUGHTS
Remember, when you're out looking for a property, you're out to make one of the biggest investment decisions possible for you or your business. As such, you will need to be willingly to get outside your comfort zone in trying to find the best deal. Don't be afraid of doing research, taking detailed observations of the property you view, asking around or asking the hard questions.
Knowing your stuff (real estate terms, etc.) is a great way to building confidence when seeking commercial properties. It will also open your eyes to which deals may be favourable to you, allowing you to find the perfect property.
When looking at commercial properties, you should keep in mind that not all commercial properties are the same. Knowing what commercial property is right for you is crucial in finding the right property. Knowing the difference between different commercial properties is also quite important.
COMMERCIAL PROPERTIES
Industrial Park Properties: These commercial properties are often used by heavy industry (for exampling, manufacturing) and zoned as such. These are usually the cheapest of the commercial properties but they don’t have a lot of the access to customers and their curb appeal isn’t as great as other commercial property types. Of course, the businesses that use these properties generally engage in business-to-business commerce and thus don't require those features as much as the other businesses do. However, many business owners may still choose this kind of property because they plan to convert it into something more favourable for their particular business. For example, they may convert a large, open factory into an multi-unit office that they can use for their accounting business.
Business Park Properties: These commercial properties generally have clusters of office buildings or other small/light-industry businesses. These properties usually have lower costs than commercial retail parks. They have more curb appeal and have relatively good access to customers and roads.
Commercial Retail Properties: These properties are most suitable for direct customer sales and include places like strip malls, plazas, large malls, and regular storefront businesses. These properties likely have the best curb appeal of the three property types and the best access to direct customers and roads.
THE PROS AND CONS OF LEASING INDUSTRIAL PROPERTIES
Pros
- Zoning a industrial property to your needs is easier in comparison to other commercial property types.
- Able to increase square footage by building new areas and floors
- Renovation, building out, and other physical changes are easier to do, legally and contractually speaking
- Leases are more affordable and open for negotiation
Cons
- Need to be aware of extra fees like common area fees and maintenance fees
- Less curb appeal than other commercial property types
- Depending on what you want to convert the property to, construction costs may be high due to having to add different systems (such as electrical, heating, plumbing, etc.)
- If your business depends on direct customer sales, you’ll likely have less access because industrial properties are usually out of the way
FINDING COMMERCIAL PROPERTIES
There are many ways to find commercial properties. Checking real estate property magazines and listings in various newspapers are a few of the ways that you can find them. There are also listing in various newspapers. You can also use the internet.
Here are some websites to consider for the Toronto market:
http://www.viewitbiz.ca/
http://www.loopnet.com/Intl/Canada/Ontario/Toronto-Commercial-Real-Estate/
http://toronto.en.craigslist.ca/off/
http://toronto.kijiji.ca/f-real-estate-commercial-office-space-W0QQCatIdZ40
RESEARCHING AND EXAMINING THE PROPERTY
Before searching for properties, it is important to know what it is you're looking for. This may sound obvious but many a time we end up overlooking the negatives of a property because we are so in love with it and aren’t paying attention to what we actually need in a property. If you logically lay out what is important for you, you'll have a much easier time looking at properties and making the decision to lease, rent, or buy. Make sure you detail what are your needs, priorities, and perhaps long-term goals are with acquiring a property. You may run into a property that is excellent but it may not be the best for YOUR particular needs. When looking at properties, just like looking at any big purchase, it is important not to appear too overexcited or enthusiastic. A savvy owner will be able to press you for more if they know that you really want the property.
Here are some things you should consider:
The Property:
- Parking: Is there widely available parking? How much parking is taken up during peak business hours? Is there the possibility to expand parking if necessary? Parking can correlate to the availability of potential customers, so keep that in mind.
- Curb Appeal: Is the property located in a good area? Is it visible to potential customers? Does my particular business rely on being visible to customers or am I doing business-to-business sales (in which case curb appeal isn’t that important)? Are there things blocking the view of the property such as trees? Is it possible to enhance the curb appeal or are there local ordinances that restrict your ability to do so?
- Maintenance: Has the property been well-maintained? Will it require repairs? How much would potential repairs cost? How is the infrastructure surrounding the area?
- Handicap Issues: Is the property handicap accessible? Does it offer a route for wheelchairs? Is it up to the specifications required by the government?
- Safety and Insurance Issues: Is the property safe? This overlaps with a lot of different areas but, in general, is it legal and safe to operate from the property? What is the situation with insurance? What are the rates and what type of insurance is required? Is the property able to pass any safety tests the government may issue? Is the property up to regulation or will you have to pay to get it up-to-date?
- Restrictions: Does the property have any restrictions? Many properties can have advertising, operational, safety, and zoning restrictions to take into consideration.
- Feasibility: Does the property require a feasibility study? Is there something wrong with the property (such as a gas leak) that will require (perhaps costly) additional testing? Will you remain on the hook for such costs? Can you get a hold of any previous studies done on the property to get a better picture on the property?
Real Estate Terms:
Consider getting up-to-date with the real estate lingo as you’ll likely run into them. Here are a few links that you can visit: http://www.cfcre.com/glossary.htm or http://www.realtor.org/NCommSrc.nsf/files/Commercial%20Real%20Estate%20Glossary.pdf/$FILE/Commercial%20Real%20Estate%20Glossary.pdf [PDF]
THE DIFFERERENT KINDS OF COMMERCIAL LEASES AND REGULAR LEASING TERMS
Types of Commercial Leases:
Lease: The standard lease has you as the business or individual named on the lease with the landlord.
Sublease: A sublease is when another business or individual already has a lease but further leases the property (or a portion of the property) to you.
Advantages and Disadvantages of Subleasing:
Pros:
- You do not have to lease a large, expensive area and, instead, can get something smaller and more appropriate to you
- If, after some time, you require more space, the possibility may exist to take the whole lease from the person or business subleasing to you
- The possibility of free amenities such as alarms, guards (possibly), and/or internet.
- Less legal red tape
- Business synergy, networking, and possible cross-pollination of ideas as you will likely exist with other businesses
- Less responsibility for the property in terms of extra and hidden fees as the original leaser is on the hook for it
- Possible access to greater in-house support that is covered in common
- Generally less expensive and less hassle to get
- The property could possibly be ready immediately and come with furnishings and other benefits
- Access to a common area with shared costs that are spread to everyone
Cons:
- If the original lease terms are unfavourable, the leaser may pass on those problems and fees to you, the subleaser
- Less maneuverability in terms of being able to use the property the way you want to
- Repairs and maintenance problems will have to go through the person or business you are subleasing from and, as such, may be subject to delays.
- Shared space means less influence for your business compared to if you had your own place
- If the person or business you are subleasing from is unable to uphold their lease (by, say, being unable to pay their lease), they may lose the lease and you may also be ejected or face other problems
COMMERCIAL REAL ESTATE LEASES: COMPREHENDING THEM AND SUCCESSFULLY NEGOTIATING THEM
Although you may have experience with residential leases, you should know that commercial leases and residential leases are quite dissimilar. As such, there are many questions that you should ask and many things to consider before taking the leap.
Knowing the type of commercial lease that is available is highly important as it can often make the difference between getting charged a high rent and a low rent. Some financing options may also be more favourable for you in comparison to others. So, it is important to know which commercial lease type would be the best fit for your business.
Being able to negotiate regarding your lease is also important. Like all contracts, leases are generally able to be negotiated. Of course, this would depend on your landlord. It is entirely possible that they will not be willing to negotiate and, instead, give you a flat, upfront contract that they'll ask you to sign. This puts you in a disadvantageous position as you'll have to accept whatever terms he or she has put forth. Still, you should always attempt to negotiate because after the contract is signed, you'll be held to it.
Knowing what fees and costs are associated with the lease is also crucial. Knowing your rent is just one part of the lease equation. There are also many other fees such as utilities fees (and how they are calculated), various kinds of taxes, various kinds of insurance, and many other open and hidden fees, that you’ll need to take into consideration. At first glance of a property, it may be the case that you think that you've found the perfect property. But, after paying close attention to those extra fees and costs on the lease, you may come rethink the viability of acquiring such a commercial property.
NEGOTIATING FOR A COMMERCIAL PROPERTY
Once you've found the property you'd like to lease, the time for negotiation occurs. When negotiating, always remember that the initial offer from the landlord is more often than not inflated. You'll need to be ready and willing to ask for better terms and/or a better price.
Try to get the asking terms in writing from your potential landlord. This will help you to get a better picture of what kind of lease you are getting and for what price.
If the property you're looking to lease or sublease has a common area, you can expect to pay some fees for it. When negotiating Common Area Fees, know that you have some leeway to get a deal. Be prepared to negotiate and bargain for a good deal.
When preparing an offer, remember that you should be convincing the landlord why you and your business would make a good tenant. A landlord may be willing to give you better terms over someone else if you're likely to pay on time and not be a hassle. If you are offering your own terms, be clear about what you expect and what concessions you'd like them to make. Sometimes to consider including are the monthly rent, the length of the lease, maintenance considerations, and fees.
FINAL THOUGHTS
Remember, when you're out looking for a property, you're out to make one of the biggest investment decisions possible for you or your business. As such, you will need to be willingly to get outside your comfort zone in trying to find the best deal. Don't be afraid of doing research, taking detailed observations of the property you view, asking around or asking the hard questions.
Knowing your stuff (real estate terms, etc.) is a great way to building confidence when seeking commercial properties. It will also open your eyes to which deals may be favourable to you, allowing you to find the perfect property.