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James Malcolm: 10 Questions to Ask your Commercial Agent When Leasing an Office Space

You can never be too careful when signing a lease for commercial office space and failure to do your due diligence can lead to problems. For instance, the wrong space can hurt your business if it’s difficult for your clients to access your building or if you don’t have the amenities you require. To minimize the chances of these (and other) disasters occurring, consider asking your commercial property managing agent the following questions:

1. What happens if the space isn’t ready by the expected move-in date?

Unless the space you want to occupy is already vacant and fits yours needs exactly, there are all types of last minute issues that can come up. Your lease should clearly detail what happens if the space isn’t ready by the purported move in date. Be wary of any clauses that allow the landlord give you an alternative space if the new space isn’t ready on time. This solution only magnifies the costs and other issues associated with moving.

2. Does the lease come with an option to renew?

After your lease expires, the landlord is under no legal obligation to offer the same space to you - unless there’s a renewal clause in your lease. This guarantees that you will have first dibs on the space when the lease expires.

3. Will the landlord take on the cost of changes (like new carpet, special electrical needs, etc)?

You will probably want to modify and update your new office space to meet your specific requirements. In most cases, you will be responsible for these costs. But there are some landlords will amortize the costs over the term of the lease.

4. How much traffic does the area get?

Is your building in a central location that’s close to train stations and airports to accommodate heavy business travel or out of town clients? Dependent on your business type, this may help determine the amount of traffic that you will receive. The agent should have information about community demographics, car counts, etc. available.

5. Do you have “right of first refusal” if the space next to your becomes vacant?

There are some instances when a tenant is faced with unexpected growth and, when that happens, there are some landlords that will move you to a larger space with no penalty. But, it’s important to note that is dependent on the landlord. If there is a “right to refusal” clause in your lease, it will ensure that you get first dibs if any adjacent spaces become vacant.

6. Is it possible to secure a non-compete clause so that a competitor cannot open up shop in your center or building?

Having a competitor in close distance can spell disaster for your business but usually, there are zoning laws in place to protect your company. Still, it may be possible for you to negotiate stricter limits with your landlord.

7. Is it possible to enter into a CAM Stop Lease?

A lot of leases today are triple net i.e you are responsible for paying the rent as well as a share of the property taxes and CAM fees for the property. A Cam Stop Lease will ensure that you are only responsible for the increase in property taxes and CAM fees above your initial base year. You may also want to ask for a cap on the CAM so that it won’t increase by more than a certain percentage.

8. What happens in if a major system (like electrical, plumbing, or HVAC) fails?

Agreements about repairs and renovations should be in writing and, in the best case scenario, come complete with a detailed floor plan and a cost estimate from a reputable contractor. But, it’s important to note that this standard is different from property to property.

9. Who is responsible for insurance?

When signing a lease for an office space, we tend to skip over insurance. And, as a result, a lot of buildings (especially those with several tenants) are coverable by insurance policies that are inadequate in some respects and overlap in others. Thus, if a major disaster (like a fire) occurs, it can take years for the various insurance companies involved to check out the claims and decide where coverage begins and ends.

10. Will the office space meet your technology needs?

Most commercial properties offer tenants networking options like T1s, fiber, DSL, and Cable. If your business will require a ton of bandwidth for its successful operation, make sure that the property has the infrastructure to support your needs.

Moving to a new commercial space can be a hassle. But, if you ask your commercial agent the aforementioned questions, it can take a lot of the headache out of the process. Good luck!

James Malcolm is the marketing specialist at RAM Real Estate Asset Management.

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