How to find the Perfect Rental Property for your Small Business
When a small business owner is searching for the perfect rental property, they will need to consider a few important factors in order to make a well-rounded decision. First, one must consider the geographical location and how the location affects the goals and objectives of the business. Second, one must consider logistical factors including the space, neighboring business, and accessibility. Third, one must compare apples to apples when choosing from more than one property. Lastly, one must consider the contractual obligations that will be expected of them. These are all detrimental considerations that will lead one to choose the perfect rental property for their small business.
Geographical location
If the small business will be selling services or products, the small business owner should consider conducting a market research study to establish the geographical area that will afford the highest percentage of success. Factors to consider when opening a storefront is whether competing companies are located nearby, proximity to public transportation, is the area conducive to attracting qualified employees, is the area zoned for that particular type of business, is the area safe and attractive to customers, accessibility and visibility from main roads and is there room for expansion.
If the small business is not a storefront, and one is simply looking for office space, the determinative factors are substantially different from someone looking to rent a property with a much broader function. One must consider if the location is conducive for conducting business. For example, is it located in an accessible location that clients can easily get to? Is the location conducive of quiet business meetings? Meaning that the ideal location may not be located adjacent to a loud train station or manufacturing plant. This would only distract clients and participants of important business meetings. Ideally, the location should be easily accessible from main highways to ensure easy commutes by prospective clients. If the small business will be hosting out-of-town clients, a close proximity to restaurants and hotels is detrimental.
Logistical Factors
One must consider if the potential rental property suits the particular business needs. In doing this, consider the actual space; will it accommodate the business adequately and will the property owner approve an appropriate build out? Are sufficient storage facilities available since offsite storage facilities will be an additional operating expense. Consider the neighboring businesses. Will the anchoring businesses drive customers to your business or accommodate your clients? Conversely, unattractive neighboring businesses may hurt your business. Can neighboring businesses serve as essential suppliers, distributers, customers or potential business partners? Consider the physical appearance of the unit itself and the surrounding area. Is the property in need of numerous improvements and may convey a poor image on your business? Consider the security features of the unit itself as well as the surrounding area. Will your clients or customers feel comfortable visiting your location, parking their vehicles in the parking structures and walking around?
Compare apples to apples
Property owners calculate square footage based on various methods. Some use inner walls, outer walls and mid points. When comparing prices verify how the total square footage was calculated in order to make a fair comparison across the board. Determine what common areas are included with the rent in each property. For example, two office spaces with the same square footage and same rental rate may offer substantially different common areas that the small business owner can utilize for the benefit of their clients or customers. Obviously, the property that offers a greater common area offers more benefits for the small business owner. Consider the lease terms of each property when comparing more than one property. Flexible lease terms may trump lower rent charges in some cases. Consider if percentage rent is required. Percentage rent is a portion of the business owner’s profits that must be paid to the property owner. This is typically seen in commercial buildings such as shopping malls and plazas.
Contractual considerations
A significant factor in locating the perfect rental property for a small business is the contractual obligation placed on the business owner. These obligations must be determined and deliberated in significant detail before making a decision to sign the lease and commit oneself to the obligation.
Contractual elements that may factor into deciding on the perfect rental property for a small business owner include the following items. Determine if the lease allows assignment or subletting. It is preferred that the lease allows assignment and subletting because this means that the business owner can vacate the premises and find someone to take their place; all without penalty on the original business owner/tenant. Determine whether the property owner or the business owner has the legal responsibility for complying with the American with Disabilities Act accommodations. The ADA requires certain structural accommodations. Ideally, the property owner will be responsible for such structural accommodations, not the tenant. Determine if there is an exclusivity clause in the lease. An exclusivity clause restricts the property owner from leasing a nearby space to a competing company. Determine if the lease includes a use clause. A use clause restricts the type of use that the business owner can engage in. Ideally, the use clause should be broad in order to allow the business owner to expand or enhance business in the future. Lastly, the business owner should be allowed to negotiate a cap on rental increases over a long-term lease period. This will keep the yearly rent increases manageable and predictable.