Commercial Leasing: How to Avoid Costly Mistakes

Two businessmen are negotiating in office

When it comes to your business, signing a commercial lease will be one of the biggest decisions you make. And if you make a mistake, it could end up being one of your costliest decisions. When it's time to renew the lease, many business owners and managers do so without giving it a second thought. Things seem to be going okay, so why not stick to business as usual? But what worked for your company five or 10 years ago when you signed the initial lease may not be working for it today. Avoid making a bad decision by following these tips:

Plan Ahead

Ask any commercial real estate expert, and they'll say the most common mistake business owners make is waiting until the last minute to renew the lease for their office space. It's true. If you wait until those last few weeks, you give up the option to negotiate everything from price to maintenance with your landlord. He or she knows your options are limited at this point, so they will stand firm on what they want. You're left without many choices. Planning ahead gives you time to understand current market trends — or hire someone who does — and use them to your advantage, whether you want to negotiate or you find that you're better off moving to a new location.

Planning ahead also gives you time to evaluate your own needs. You have time to think about what your future holds — growth, downsizing, geographical changes for customers and employees — and how your current commercial lease fits in with them. Ideally, you'll start evaluating whether or not you want to renew your lease about 12 to 18 months in advance. Larger companies may need more time, while smaller companies can sometimes get away with starting about six months in advance.

Don't Focus on Price Alone

As a business owner or manager, your bottom line is almost always your top priority. And for this reason, you may be tempted to make decisions based on the price of rent alone, but that's not always the best strategy. While the price should factor into your decision, the location of the property, the square footage, amenities available to you and how the space fits your needs should all be part of the equation. For example, if your customers and employees all live in the city, but your office is in the suburbs, it may be worth paying a little extra each month to relocate to the city.

Consider the Future of Your Business, Not Just the Present

Another common mistake business owners make is thinking about how their current commercial space works for them right now or even how it's worked for them in the past. Instead, you should focus on how it may work for you over the next five to 10 years. You may have a plan for extensive growth and hiring more employees. You may find that many of your employees are now working from home due to COVID-19, and thanks to technology, it's a win-win situation for all of you that may become permanent. Or, a competitor may be moving into the neighborhood, and you want to put some distance between you. While you can't plan for everything that will happen, it's a good idea to consider all options.

Work With a Commercial Real Estate Broker

Commercial real estate leases are complicated documents. Negotiating them can be an even more complicated process. Far too many business owners end up paying too much or not negotiating a lease to its full potential because they simply don't understand it. On the flipside, your landlord fully understands the lease, which gives him or her the upper hand if you aren't using a commercial real estate broker.

Use Data to Better Understand Your Needs

A real estate broker can help you make an even better decision when you come to him or her armed with sensor-driven data that shows exactly how your employees interact with your commercial space. When you make your final decision about your lease, it's important that you don't rely on guesswork. Real-time data makes it possible for you to renew your lease or move your office based on actual numbers rather than human observation, meaning there's no room for error.

That's where 4SITE by CORT comes in. We place sensors all around your space, from your common areas, like conference rooms and amenities, to private work spaces, like offices and cubicles. These sensors collect data that we put into a spreadsheet and give directly to you to use when you're making a decision about your lease. Take the spreadsheet to your real estate broker, and work together as a team to come up with a smart plan for your company's future.