Commercial Real Estate News / Leasing/Renting / A Guide to Finding Your First Commercial Property for Rent

A Guide to Finding Your First Commercial Property for Rent

Published: 11-13-23 Category: Leasing/Renting

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Generally speaking, most businesses lease commercial property at some point. You might say it's an inevitable necessity, but searching for commercial real estate for rent can be an imposing task, especially if you're not familiar with the process.

Between finding a location, negotiating a lease contract, and finalizing the details, renting commercial real estate gets complex.

Fortunately, that's where we come in. Here, we've put together this quick guide on finding your first commercial property for rent. We'll guide you through crucial factors to consider in your search, as well as the negotiation and signing processes.

Let's get started.

Factors to Consider When Searching for Commercial Property

Whether you're looking for a garage to rent or want to find some office space, the fundamentals of commercial property are generally the same.

Here are five key considerations you should keep in mind throughout your search..

#1 – Location

“Location, location, location” is somewhat of a cliche, but it's still a true maxim in the world of commercial real estate. Some key questions to ask yourself about the property's location include:

Is the location accessible for customers and employees?
What is the surrounding property market like?
Will you share space with other tenants?
What's the parking situation?

Location is a key consideration for all businesses looking for commercial property, but it can be especially important for businesses that rely on customer traffic, like retail outlets.

#2 – Size & Layout

Commercial outlets, compared to residential housing, have specific space and layout needs.

For instance, retail space for rent should have enough floor space for displays, and the layout should permit visual window displays for passersby shoppers.

#3 – Amenities & Facilities

Aside from facilities necessary for business activity, look for nearby amenities.

For example, if you're leasing office space, a building with nearby transit, food, and recreation options might be a better value proposition for you and your employees.

#4 – Lease Terms & Conditions

The typical lease term for commercial property is five years with an option to renew for an additional five years at the end (“5-and-5”). However, commercial lease terms usually land somewhere between one and ten years.

The two main types of commercial leases are gross and net leases. In a gross lease, the tenant pays a flat monthly rent that covers all expenses. With a net lease, the tenant pays a base rent and also covers some or all of property taxes, insurance, and maintenance.

#5 – Budget & Financial Considerations

Ultimately, your choice of commercial real estate for rent will be constrained by budgeting concerns. Average rent-to-revenue ratios range between 2% and 20%, depending on the industry.

You can also try to peg rents at 5% to 10% of gross sales per foot.

Researching and Shortlisting Potential Properties

The best place to start your search for commercial property for rent is through online listing services and commercial real estate websites. You can filter properties according to your preferences, and some platforms let you directly contact the seller, like our platform here on MyEListing.com.

If this is your first time looking for commercial real estate for rent, we recommend working with a real estate broker. A broker will be able to give you general advice about commercial property, vet potential properties, and gather necessary documentation.

While online listings are certainly nice, the best way to properly gauge a property is to check it out in person. Most landlords will schedule showings, so you can get a feel for the space. Be sure to take note of the layout and amenities and whether they're conducive to your business.

Negotiating Lease Terms and Conditions

Simply put, you can't negotiate your first lease if you don't know what you're talking about.

Some common lease terms and phrases include:

Lease term: The total length of the lease.
Escalation clause: Defines the timing and amount of rent increases.
Use clauses: Defines how the tenants can use the property.
Renewal clause: Defines the circumstances for renewing and renegotiating the lease agreement.
Insurance clause: Defines insurance requirements for tenants (e.g., liability insurance).

Another important aspect of negotiations is laying out maintenance and repair responsibilities. With a typical net lease, the tenants will be responsible for most building repairs, excluding basic structural upkeep.

Lastly, you need to negotiate a termination clause. A termination clause defines under what conditions a tenant can break a lease without incurring a penalty. For example, a business might negotiate a clause that lets them break the lease if revenue drops below a certain amount.

Finalizing the Rental Agreement

Before signing anything, you should have a real estate attorney look over the language of the lease. An attorney can help clarify any ambiguous language and revise portions of the agreement to be beneficial for all parties involved.

All parties must understand the finer legal points of the agreement. Failing to uphold obligations and responsibilities can lead to litigation.

Tips for a Smooth Transition and Successful Tenancy

An organized and structured approach to finding your first commercial property for rent usually takes about six months to go from starting your search to signing a lease.

Below are some tips for expediting the process:

Don't wait to get started planning the move. The sooner you hire a moving company and plan, the easier it will be to settle into your new space.
Negotiating lease concessions, such as rent abatement, can help reduce your bills while the business acclimates.
Make sure you understand all your lease obligations and responsibilities. This includes rent obligations, maintenance responsibilities, and abiding by all local codes and regulations.
Lastly, try to maintain an open and transparent relationship with the landlord. Prompt and professional communications will help you stay on their good side.

The foundation for a successful transition is knowing your lease agreement inside and out, including notice periods and security deposit requirements.

Get Vetted, Interested, & Local-Market Commercial Real Estate Clients Sent Straight to Your Inbox

Get notified when someone in your local market is looking to buy, sell, or lease commercial real estate with MyEListing.com's Client Connection Program: Agents using our Client Connection Program tend to close 4x more deals than those without.