The Ultimate Guide to Leasing Commercial Real Estate

Everything You Need to Know Before Signing a Lease

Leasing commercial real estate can be a game-changer for your business—but making the wrong decision can cost you thousands of dollars and lead to unnecessary headaches. Whether you're opening a new location, relocating, or expanding, this guide will walk you through the key factors to consider before signing a commercial lease.

1. Understanding Commercial Leases

Unlike residential leases, commercial leases are more complex, customizable, and negotiable. Here are the three main types of leases:

• Gross Lease (Full-Service Lease) – The landlord covers all property expenses, including taxes, insurance, and maintenance.
• Net Lease (Single, Double, Triple Net - NNN) – The tenant pays rent plus some or all of the property expenses (taxes, insurance, and maintenance).
• Modified Gross Lease – A hybrid between the two, where both parties split certain costs.

Knowing which lease type you're dealing with will help you negotiate better terms.

2. Key Lease Terms to Understand

Before signing, ensure you understand the following lease terms:

? Base Rent & Additional Expenses – What is the starting rent? Are there annual increases? Are there additional costs like common area maintenance (CAM) fees?

? Lease Term & Renewal Options – Is the lease short-term (1-3 years) or long-term (5-10 years)? Are there options to renew?

? Use Clause – Does the lease allow your intended business use? Some leases restrict certain business activities.

? Exclusivity Clause – Ensures that the landlord won’t lease space to a direct competitor in the same property.

? Tenant Improvement (TI) Allowance – If the space needs modifications, will the landlord contribute to renovations?

? Sublease & Assignment Rights – Can you sublease to another business if you no longer need the space?

? Personal Guarantee – Many landlords require a personal guarantee, making you personally liable if the business defaults on rent.

3. The Commercial Leasing Process

Step 1: Define Your Needs

• Location: High foot traffic? Near suppliers?
• Size: Enough space for current and future growth?
• Budget: What’s your max monthly cost (including additional expenses)?

Step 2: Search for Properties

Use platforms like LoopNet, MyEListing, Crexi, or Digsy to find available spaces.

Step 3: Tour Properties & Compare Options

Visit multiple spaces and consider:

• Condition of the property – Will it require expensive upgrades?
• Parking & accessibility – Is there enough parking for customers/employees?
• Neighboring tenants – Are they complementary or competitors?

Step 4: Negotiate Lease Terms

Never accept the first offer. Negotiate: ? Rent & escalation clauses ? Who pays for maintenance, repairs, and improvements ? Length of lease & renewal options

Step 5: Review the Lease with a Professional

Always consult a real estate attorney or broker to ensure you're not agreeing to unfavorable terms.

4. Common Mistakes to Avoid

? Not Understanding Total Costs – Base rent might seem affordable, but additional expenses can quickly add up.

? Overcommitting to a Long-Term Lease – If your business is growing, a shorter-term lease with renewal options might be better.

? Skipping Due Diligence on the Landlord – Research the landlord’s reputation, property maintenance history, and existing tenant reviews.

? Ignoring Hidden Fees – Ensure there are no unreasonable CAM fees, percentage rent clauses, or penalties for early termination.

5. Final Thoughts

Leasing commercial real estate is a significant investment, but with the right knowledge and strategy, you can secure a space that supports your business growth.

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