Your career as an entrepreneur will only go so far from your spare bedroom. After all, most businesses need enough space for at least a small team of people. At this point, you may need to know how to find commercial property for lease. Not sure how? Read our guide below to learn more.
You Might Also Like:
- Apartment Buildings for Sale: Learn how to find multi-family properties for sale with our complete guide.
- Arm’s Length Transactions: What are they and why do they matter in real estate?
- Straight Line Depreciation: An important business term. Our guide features both the definition and examples.
Types of Commercial Property for Lease
While there are many types of commercial property, most businesses will occupy an office or flex space. However, some of the major property types you can lease include:
Choosing Your Location
As with any real estate decision, the location of your commercial space is of major importance. When looking for the right location, consider these factors:
- Demographics: You will likely want to be near your customers, your employers, or both. For a retail location, foot traffic may be important. To make it easy to keep your employees, you may do a drive time analysis from their homes to the office.
- Transportation: How easy it is to get to and from your location will also be important. If you have special needs such as airport access or rail capability, that will narrow your search.
- Zoning. You can’t put industrial properties in an area zoned residential. Common commercial zoning types include restaurant, retail, office, industrial, and warehouse.
These are just a few considerations. Other concerns may include the floor plan, parking, high visibility signage, or easy access to nearby hotels.
How Much Space Do You Need?
Before ever beginning your search to find commercial property for lease, you need to figure out how much space you need. For some businesses, the amount of space required can estimated based on the number of employees or customers.
For restaurants and retail stores, estimate about 15 square feet per customer. And for offices, estimate about 200 square feet per employee.
Different types of businesses within these broad categories will have different needs. For example, in an open office with workstations, 60 square feet per employee may be enough space.
For a more spacious feel, up to 500 square feet per employee may be appropriate. This kind of room is found in law firms and other professional services businesses.
Not all this space will go to employee workspace. In a typical business, some space will be used for conference rooms, lobby areas, break rooms, and other areas. Your size estimate will depend on other factors as well. For example, you will want to account for company growth.
Commercial space may be described in terms of rentable square feet (RSF) or usable square footage (USF.). RSF, the most common measure, includes a share of common areas such as restrooms, hallways, and lobbies.
USF consists of just the square footage of the space you’ll occupy. It’s important to understand this difference when you begin considering leasing commercial property.
Commercial Space Amenities
The amenities your business will require in its space can vary nearly endlessly. Common amenities include:
- On-site dining options
- Free WiFi
- Loading docks
- Outdoor spaces
- On-site security
- Fitness center
- Shared conference area
- Common lounge area
What Can You Afford?
The amount you can spend for your commercial space is determined your business’s cash flow. However, businesses of different types have typical amounts they spend for rent.
When calculating your budget for commercial real estate, what similar businesses spend is a good place to start. Here are some examples, given as a percentage of annual gross sales:
- Gas stations: 1.12%
- Electronics and appliances retail: 2.09%
- Finance and insurance: 2.82%
- Arts, entertainment, and recreation: 3.19%
- Food and beverage retail: 3.21%
- Book, hobby, music, and sporting goods retail: 3.3%
- Health and personal care retail: 3.37%
- Insurance brokers: 3.46%
- General merchandise retail: 3.86%
- Healthcare: 5.52%
- Restaurants and bars: 5.82%
- Furniture retail: 5.98%
- Hotels: 7%
- Clothing retail: 7.66%
- Ground transportation businesses: 13.55%
So an insurance broker grossing $500,000 per year typically spends 3.46 percent, or $17,300, per year. Bear in mind you don’t have to spend that much. It’s just a starting point for consideration.
How to Find Commercial Property for Lease
Now that you have a budget, size, location, and type of space, it’s time to see what is available. Online commercial real estate directories are the best place to start looking for your commercial space.
You can quickly get a feel for availability, costs and amenities in your commercial real estate market by checking one of these websites:
This online directory is the industry standard. It catalogs more than 500,000 property listings with approximately 6 billion square feet for lease. You can search listings by type, ZIP code, city, or address.
Filter searches by annual or monthly price per square foot, number of available square feet, building size, and custom keywords. The platform lets you save searches to easily search for ideal properties each day.
This listing service has more than 750,000 for lease availabilities, all updated & verified by its researchers.
This directory aggregates listings from all over the country. You can search for office, retail, industrial, medical, restaurant, coworking, and other types of space.
This online directory of commercial real estate listings is free to search and to post listings.
In addition to these directories, real estate brokerages such as CBRE and RE/Max have their own searchable online listings. By looking through the listings, you can get an idea of what’s available and what it will cost you.
For example, office space in downtown Dallas ranges from $11 to $21 per square foot per year on Loopnet. If you’re looking for retail space in Albany, New York, expect to spend $10 to $20 per square foot per year, Loopnet’s listings show.
For a restaurant in Sacramento, the range is wide. Expect from $8 to more than $50 per square foot a year, Loopnet shows. But most Sacramento restaurant spaces are about $20 per square foot.
There are three major types of leases for commercial space. You’ll want to consider the needs of your business and what the landlord is offering to determine which is best for you.
- Full-service/gross lease: Most commercial leases for office buildings are full-service leases. With a full-service lease, the rent you pay covers everything including maintenance, property taxes, and utilities. This is the best lease for tenants.
- Net leases: These call for expenses such as maintenance, taxes and insurance to be shared between landlord and tenants. There are three types of net leases: single, double, and triple.
- Single net has the tenant pay property taxes.
- Double net adds insurance.
- Triple net prorates taxes, insurance, and maintenance among tenants.
- Modified gross leases: Modified gross leases parcel out some expenses to tenants while the landlord takes care of the rest. Tenants may be allocated cleaning, utilities, or some repairs, for instance.
All lease terms are negotiable, of course. Common terms to negotiate include lease length, rent hike provisions, whether you can sublease, and what happens if you terminate early.
Build-out, or altering the space for your use, can be an issue for some businesses such as restaurants. Landlords may share in some costs of build-out, especially with longer leases.
You may need to negotiate issues such as who will own the improvements. Another question is whether the tenant will have to return the space to its original condition at the end of the lease.
Finding a Broker
A good commercial real estate broker is an important part of the way most businesses lease commercial space. The broker will both explain the process and provide local information about what’s available. After all, knowing how to find commercial property for lease can be difficult. So it’s always good to have a broker’s help.
There are two types of commercial real estate brokers:
- Leasing agents represent landlords
- Tenant agents represent tenants
It may seem that a tenant broker is far and away the best choice. But in fact both types are paid by the landlord. Typically, leasing agents get 3 percent to 6 percent of the total lease value.
Tenant brokers get a portion of the total commission as well. Again, this is paid by the landlord. So while the tenant agent is there to represent the tenant, loyalties may be divided.
After you’ve interviewed a few brokers and selected one, he or she will show you some listings. Then you’ll be able to walk through the properties. Inspect them to see if they’ll suit your purposes.
Negotiating the lease comes next. The tenant’s first step is to write a business letter of intent. It will state:
- You want to lease the space
- What type of business you are in
- The products or services you provide
- Your number of years in business
- The terms you are proposing for the lease
There are many terms to be considered in a commercial real estate leases. The length, rental rate, and deposit are clear enough. Others are unique to commercial leases. Use clauses restrict the type of business that can occupy the space.
Build-out credits describe who pays for, owns and, when the time comes, removes any alterations. You may also need to negotiate subletting rights, ability to assign the lease to someone else, and termination clauses.
Rent abatement, or what kind of discount you’ll get if the property is damaged, is another term to look at. Again, these leases can be very complicated, so it’s always a good idea to hire representation to protect your interests.
How to Find Commercial Property for Lease Conclusion
Finding and leasing commercial real estate space can be a lengthy and somewhat involved process. However, almost any business may relocate from time to time. It’s practically an essential part of business growth and a valuable skill to have, and we hope our guide on “how to find commercial property for lease” has been helpful.