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Entries Tagged as 'Lease Negotiations'

Is it Better to Lease or Buy Your Business Space?

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Your business location should be tailor-made to fit with your company budget, spacing requirements and ease of operation. For some business owners, leasing affords a sense of freedom and relieves the financial burden of a down payment, yet may be too restrictive for some kinds of operations. The decision to buy a piece of commercial property offers its own set of risks and rewards, and should be considered carefully before entering into a mortgage contract.

Leasing Commercial Space

1. Cost Effective

Leasing a commercial space will usually require a one to two month move-in deposit, making the rental space a cost efficient way to do business. New business owners may be strapped for cash, and by leasing, rather than purchasing, your storefront or office is cost effective to set up shop with minimal funding.

2. Flexibility

Leasing a commercial space gives the entrepreneur plenty of room to grow, downsize or change locations. Although once you sign a lease, you are locked into a fixed amount of time to make the lease payments, the terms may be only a matter of months to be released and start over in another location.

3. Freedom

Setting up shop without the burden of a mortgage to pay allows a sense of financial freedom. Albeit, a purchased piece of commercial property could be leased or sold to another, there could be months before the owner receives any income from the property. A hefty mortgage may also interfere with business profits and may demand downsizing of personnel.

4. Maintenance

A leased office or shop has a landlord to lean on, taking away tedious responsibilities with the plumbing, electricity and security. In a leasing situation, any repairs or legal liabilities are left in the hands of the building management team.

5. Subletting

In some situations, you may sublet your leased office space to another. However, this must be cleared in writing from the management office, and careful attention given to their rules and regulations for renting out the space.

Buying Commercial Space

1. Secured Location

Buying a piece of commercial property adds assurance that the space is secured and cannot be given to someone else. In a leasing situation, when the lease expires, the renewal process may not have the same initial terms, thus proving unfavorable to renew. However, when you purchase, your prime location is secured.

2. Equity

As with a residential piece of property, a commercial owner may take out cash against the mortgage. In an emergency financial crisis, having a mortgage to borrow from lends a sense of security and provision of funds. Most commercial purchases will require 20 to 25 percent down on the purchase price, giving instant equity to the business owner.

3. Remodeling

When you have bought a property, it is your to do with as you wish. Remolding, expansion and reconfiguration are yours for the taking. The ownership allows the business structure to be molded around the enterprise for a perfect fit and usage of space.

4. Tax Deductions

The interest on a commercial loan is tax deductible, with allowances for deducting any depreciation.

5. Lease Your Excess Space

If you own the property, you may lease your excess space without any restrictions from a third party over your head.

Article Source: Is it Better To Buy Or Lease Commercial Space For My Business

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For a more detailed analysis see Lease vs Buy office space on OfficeFinder.com

Buying Office Space , Lease Negotiations , Lease vs Buy , Office Building Sales , Office Relocation , Office Space

Commercial Real Estate Tenants Ask Landlords to Verify Finances

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After years of property owners conducting due diligence on the financial wherewithal of their tenants, commercial real estate agents say corporate clients are turning the tables when it comes to financial scrutiny.

With commercial real estate values down by as much as 40 percent nationwide and the number of foreclosures still growing, tenants in the market for new space now often conduct the kind of financial background checks of their new landlords they once might have been more likely to face themselves.

Dick Cassetti, a local commercial broker who does mostly tenant representation work, understands firsthand why.

Cassetti said one of his clients has given its landlord an April 6 deadline to make good on a promise related to tenant improvement money the client says it never received.

“Any large tenant of 20,000 square feet or more would be foolish if they could not get representations and guarantees that (their landlord) has money in the bank,” Cassetti said. “If the landlord is not willing to escrow the funds promised to the tenant for the build-out, then I as a tenant would look for a different landlord.”

It’s a very different reality from five years ago during a real estate boom, when such measures by tenants were relatively rare.

The motivations for tenants stem from the negative trends in real estate finance...

Read more: Pittsburgh Business Times

Note:
This office leasing issue is not exclusive to Pittsburgh. Office space tenants around the world need to check on the ability of their prospective landlords to perform.  How do you go about it? The best way is to have an office space tenant rep by your side to guide you. They deal with these issues day in and day out. They protect you and make sure you avoid costly mistakes. Their services are free to you. It is a no lose proposition.

A previous post that is pertinent to this issues is Protecting Your Businsess

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Lease Negotiations , Office Rental , Office Space , Office Space Negotiations , Tenant Representation

Shedding the Light on Shadow Office Space and the True 19% US Office Vacancy Rate

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Shadow Office Space is office space that is currently under lease by a tenant, but which is not being used due to layoff of employees. It is also not listed for sublease or identified as available space. This could be space that a company is holding so that as the economy comes back they will have the space they need to get back to their “normal” workforce.  Most office leases are long term leases and shadow office space could be that space within a leased premise that is not being used, but is not suitable for sublease due to the layout and / or security concerns of a company.  It is also space that will be put on the market, but has not yet been offered.  This is space that is hidden from the vacancy rate statistics we hear about.  It can be compared to the unemployment figures that come out, but do not include the underemployed or those that have given up looking for a job. In other words, it should be added to the published vacancy rates in order to determine the true office vacancy rate.

Shadow office space will most likely the first space to be filled as the economy comes back. This will also distort the absorption rates. With no record of it being vacant, there will be no record of it being filled with new employees. When the office recovery finally does come, it will be under stated. 

How much is out there? This is a very tough question to answer without a large survey of businesses to determine their current space usage related to their leased space. Based upon our discussions with local OfficeFinder Tenant reps, the true vacancy rate, including shadow space would be 1% – 2% higher than the stated rate in any given market. That means that the Manhattan market would have in excess of 2.5 million square feet of shadow office space; not an insignificant amount of space.

From our recent post, US Office Vacancy Rate Hits 16-year High, the stated vacancy rate was 17.2%. Including a Shadow Space factor, the real US Vacancy Rate would be close to 19%.

What this means to tenants is that there are lots of great opportunities that they can take advantage of. One of the biggest problems for them is the ability to cull through the many options to find the right alternatives.  That’s where engaging a tenant representative comes in. They know the market. They know the landlords. They do this every day and can help tenants find and negotiate for the best options available. Best of all, tenants get representation at no cost to them. Listing agent fees are split to pay for their services.

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Lease Negotiations , Manhattan Office Space , New York Office Space , Office Rental , Office Space , Office Space Negotiations , Office Vacancy Rate , Sublease Office Space , Tenant Representation

Commercial Lease Checklist

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It's crucial to understand from the get-go that, practically and legally speaking, there are oceans of differences between commercial leases and residential leases. Commercial leases are not subject to most consumer protection laws that govern residential leases - for example, there are no caps on deposits or rules protecting a tenant's privacy. Keep in mind that besides the amount of the rent, other less conspicuous items spelled out in the lease may be just as crucial to your business's success. For instance, if you expect your shoe repair business to depend largely on walk-in customers, be sure that your lease establishes your right to put up a sign that's visible from the street. And if you are counting on being the only sandwich shop inside a new commercial complex, make sure your lease prevents the landlord from leasing to a competitor.

The following checklist includes many items that are often addressed in commercial leases. Pay special attention to a few of the terms, including:

  • rent, including allowable increases and method of computation
  • security deposit and conditions for return
  • length of lease - also called the lease term
  • whether the rent you pay covers utilities, taxes and maintenance - called a gross lease; or whether you will be charged for these items separately - called a net or, if the tenant must cover three additional costs, a triple net lease
  • whether there's an option to renew the lease
  • if and how the lease may be terminated, including notice requirements
  • what space is being rented, including common areas such as hallways, rest rooms and elevators
  • specifications for signs, including where they may be placed
  • whether there will be improvements, modifications or fixtures - often called buildouts - added to the space, who will pay for them and who will own them after the lease ends
  • who will maintain the premises
  • whether the lease may be assigned or sublet to another party
  • whether disputes must be mediated or arbitrated as an alternative to court

Source: Inc Magazine

Note:
Although this article is a few years old, it still stands the test of time. While this is good information, there is no substitute to assistance from a good tenant representative. That's what we do every day. To top it off, there is no cost to you for the services of your own representative. Landlords invariably have a listing agent under contract. The tenant representative represents you, but shares in the listing agents fee. It's win-win for you.

Find a Tenant Representative to find the right space ant the right price without the hassle.  Avoid costly mistakes and get the best deal possible.

Commercial Real Estate , Lease Negotiations , Office Leasing Tips , Office Rental , Office Space , Office Space Negotiations , Tenant Representation

Silicon Valley, Ca - Vacant Office space equal 15 Empire State Buildings

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A Bloomberg news report says Silicon Valley has the biggest office space glut since the dot-com bust, leaving the U.S. technology hub with empty high-rises and office parks that make it impossible for landlords to sustain average rents.

More than 43 million square feet of office space stood vacant in the third quarter of last year -- that's the equivalent to 15 Empire State buildings and a vacancy rate over 21% for the silicon valley area.

Asking rents averaged $34.56 a square foot for Class A space in the third quarter, 21 percent less than a year earlier. The rate for flex space was $14.16 a square foot, down 16 percent, according to CB Richard Ellis.

Commercial property foreclosures will at least double in 2010 and job growth is not expected to return for two years after that, held back by U.S. consumers who are saving more and changing their spending habits.

Unemployment in the greater San Jose area was 11.8 percent in November.

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Lease Negotiations , Office Rental , Office Space , Office Vacancy Rate , Silicon Valley Office Space