There are roughly 30.7 million small businesses in the U.S. While some of them employ remote workers and have no need for physical office space, many more rely on a building in which to facilitate transactions and build their company.
As the firm grows, many business owners find they need more room to house their expanding employee and customer base. Of course, most will know to budget for the expense of renting commercial property and understand what to look for. However, some tend to overlook the smaller considerations that come with commercial real estate.
1. Why Is the Owner Selling?
The first thing to consider when touring potential properties is why the owner is selling them in the first place. What was their reasoning behind putting them on the market? Often, this question will help you uncover red flags you can use to negotiate the price. On the other hand, you may find the problems are too extensive to justify a decision to rent the place. In this case, you’ll have to continue your search elsewhere.
2. Demographics and the Market
Even the most perfect properties may not be right for you. For instance, the building may be flawless and promises a profitable return on investment. But, if it isn’t in the best location, you may have to reconsider. Research the area’s demographics and consider your market. If the two don’t line up, you’ll likely be better off in a location that sees more traffic from your target audience.
3. Real Estate Agents
Buying or renting commercial real estate is a high-stakes, high-reward business. You’ll want to partner with an agent who has a good track record and aligns with your values and services. Consider hiring a real estate agent that has experience within your profession. Additionally, you may hire a personal accountant and real estate attorney to cover all your bases and ensure you land the building of your dreams.
4. Obtaining Permits
Once you sign a lease, you may want to make a few renovations or add on to the building. Before doing so, you may have to obtain permits. For example, Columbus, Ohio, requires owners to obtain a permit before adding fencing, patios, decks and parking lots. Moreover, you must factor in application costs, which can account for 6 to 18% of the project’s total budget in states like California. Research zoning and permit laws to estimate local and state fees.
5. Energy Efficiency
To operate at optimum performance levels, the building you choose should be energy-efficient. Otherwise, energy expenses can add up and cost you a fortune over the leasing period. Before signing a lease agreement, make sure the building has proper insulation and a tight envelope. Afterward, you can switch to energy-efficient lighting alternatives and add quality sealing on warehouse dock doors, keeping the space cool in the summer and warm in the winter.
6. Surprise Costs
As you plan renovations, you should also budget for surprise costs. Just as homeowners should budget at least 20% over the estimated cost, you should plan for unexpected expenses. Asking questions and uncovering red flags can only do so much. Whether you’re dealing with a dishonest contractor or neglected to have an inspector audit the building, odds are you’ll end up paying more than you bargained for, so prepare for it.
7. Longer Time Frame
Of course, learning complex investing strategies, touring prospective commercial properties and renovating your chosen space will require more time than if you were dealing with residential property. Plus, you may have to jump through a few hoops to obtain permits — which, in some cases, can take up to a few years. Therefore, it’s best to begin your search before you feel pressure to rent more space. Otherwise, the longer time frame may stunt your company’s growth.
Taking an Active Role
Naturally, you’ll have a very active role in the planning, budgeting and searching processes. However, your job isn’t over once you find commercial property and relocate your staff. Instead, you’ll take on the continuous role of monitoring development and economic trends and ensuring the property operates at its fullest potential.
That might sound like a lot of work, but your dedication and commitment will pay off eventually, and you may come to love your new role in your business.
About the Author:
Oscar Collins is the managing editor at Modded. He writes about cars, fitness, the outdoors and more. Follow @TModded on Twitter for more articles from the Modded team.