Original article posted in Inside Tucson Business here.
You can find Tucson office, retail or industrial space that fits your business needs. But as you’re looking for commercial real estate to lease or purchase, make sure you don’t make these costly mistakes.
1. Not Allowing Enough Time
Facility research, property inspections and comparison analysis can usually be completed in a week or so by motivated companies already familiar with the local market.
However, those tasks are only the tip of the “time drain” iceberg. Several commonly overlooked complications need to be factored into the relocation timeline.
Once you identify an appropriate commercial space, the real time commitments begin.
• Negotiations. Negotiations with the landlord and preparation of the lease can span weeks or months.
• Architectural plans. Architectural plans for necessary renovations must be completed to receive building permits. Finalizing plans can easily take one to two months.
• Permits. Before renovations can begin, building permits must be obtained. This will take additional months.
• Renovations. Once the lease is signed and permits obtained, the interior can finally be finished or renovated, which can add additional months.
Bottom line: Six months to a year is a reasonable time frame to use when looking for new facilities. Expect the process to take even longer if experienced professionals are not used to guide the process.
2. Neglecting Long-Term Priorities
Owners who think only about solving immediate needs can quickly face expansion problems.
In addition to evaluating short-term needs relative to square footage (number and size of rooms), type of floor plan (open, private or a mixture), communications, parking, access, security and more, be sure to factor in long-term needs.
By obtaining facilities and lease terms that will allow the company to expand, downsize or relocate as circumstances dictate, business owners can avoid the unnecessary headaches, loss of business and costs associated with relocating.
Here are examples of such important lease clauses.
Expansion right obligates the landlord to provide the tenant with more space should it become necessary.
Cancellation right, commonly referred to as a “kick-out” clause, allows the tenant to break the lease under certain conditions. One example: when the tenant needs to expand and the landlord cannot provide the additional space on the premises.
Extension right, similar to a renewal option, allows the tenant to remain in the premises. A right of first refusal is a type of extension right.
Sublet right gives the tenant flexibility in that if it must relocate, it may sublease the space and mitigate the economic pressure.
Suggestion: After discussing the company’s immediate needs and long-terms goals with senior management in all departments, meet with leasing experts, space planners and architects to determine
• The most productive combination of office size and layouts (modular furniture, hoteling, size, amenity requirements, etc.)
• Facilities that are flexible enough to service future needs
• Certain lease clauses that will be negotiated into the lease document.
3. Not Securing Adequate Representation
Most business owners cannot afford the time necessary to learn the complicated commercial real estate industry and strategies for finding new commercial space.
Costly errors can easily be made unless someone in the company is already an expert in commercial real estate.
This lack of knowledge and support, combined with time pressures, can cause unrepresented owners to make location decisions without being aware of all the choices. These errors can cut into their profits and increase their financial exposure.
An experienced and specialized tenant representative counterbalances the landlord’s professionals and will ensure that the tenant receives the best possible rates, terms, incentives and lease clause protections.
This valuable service may cost the business owner nothing, since tenant reps usually share the leasing fees paid by the landlord.
Using the wrong broker may lead to incomplete information or conflicting loyalties because of hidden agendas or landlord relationships.
Suggestion: Use experienced tenant rep brokers to take advantage of their well-developed and extensive network, an asset that allows them to commonly find facility choices that are not yet vacant or on the market.
Business owners who do not use a broker will likely not be aware of all the possible facility choices.
Additionally, business owners should keep their broker involved in the expansions, contractions, renewals and extensions that occur during the lease to prevent uninformed decisions that lead to lost opportunities and costly decisions.
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