Starting a Business - Advise Needed on Commercial Lease
Hey all, 

My wife and I are starting a business and aren't very familiar with commercial real estate so I was hoping to get some pointers from people who have dealt with this before.

So far we have complied a list of locations from various companies and have also scouted locations we may be interested in. We've also done some research and it seems pretty straightforward but don't want to miss anything.

Some questions I have:

What should I know before talking to the agent?

What's the best negotiation strategy? (Willing to pay for renovations)

Is it necessary to have an agent represent us and if so what are the typical cost associated with hiring one? (AZ)

Thanks in advance, I look forward to the feedback!
[{"id": "hkojy51", "text": "Spend the $1-2k on a business attorney who specialises in real estate transactions. Don\u2019t just sign what is presented, it\u2019s a negotiation after all.", "replies": [{"id": "hkpmjfh", "text": "Can\u2019t emphasize this enough. This.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hkol2oh", "text": "The first questions any reasonable landlord will ask you is what type of business and do you have an existing location. \n\nMake sure the building is zoned for what you need, has enough handicapped parking, and the bathroom is ada compliant.", "replies": [], "depth": 1}, {"id": "hkom33a", "text": "Look into hiring a lease negotiater", "replies": [], "depth": 1}, {"id": "hkons7j", "text": "GET A LEASING AGENT. It\u2019s free for you, the landlord pays. Check out CBRE, JLL, Colliers, cushman and Wakefield. Those 4 companies should each have a specialized broker in retail etc that can help you", "replies": [{"id": "hkoty0n", "text": "Thanks!\n\nLooking into this now - appreciate the feedback.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hkoqbor", "text": "\\- As the other person mentioned, be ready to hire an attorney with experience with commercial real estate leases\n\n\\- As the other person mentioned, understand what each location offers (i.e. what previous person mentioned + whether it's a NNN, or base stop and property's historical OpEx, what is/is  not included \n\n\\- You wouldn't have to pay commissions to the agent since LL will be paying it.  However, the agent's commission is rolled into your rent one way or another.  A direct lease (where agent represents LL and TT) usually has a slightly lower commission.\n\n\\- Assuming this is your first business you'reopening, an agent most likely will not give you much attention.  Or, they may pass it off to a jr agent, so it could get bumpy.  If they don't call back after a couple of initial attempts, move on to another agent.  \n\n\\- Have your personal financials ready for submission along with your business plan.  LL will most likely seek a personal guarantee (don't volunteer with personal guarantee and if possible, have it extinguished before the lease term or be sure to get it removed at time of lease renewal).\n\n\\- Don't volunteer to pay for TI.  See what the LL offers first.  Besides, TI will vary a lot depending on the existing condition of the space.  You don't want to be saddled with surprises negatively impacting timely opening and cash.  As a last resort, you get LL to deliver the space in white space condition.  Be aware, if you do your own TI, you'll be responsible for passing inspection and getting CO.  LL's people may already know the ins and outs with the town/inspectors.  Some towns are very finicky and you may waste time/$$$.", "replies": [{"id": "hkotr68", "text": "Thanks for the insightful feedback. Definitely going to start looking for an attorney. \n\nWhat are your thoughts regarding a direct lease vs finding our own agent? Should we be cautious about conflict of interest with one agent representing both parties? \n\nThanks again!", "replies": [{"id": "hkpn5an", "text": "If this is your first endeavor with commercial leasing I would definitely seek an agent.   Beyond navigating the more nuanced lease terms they will have a better handle on the market dynamics in terms of rents occupancy and overall demand.  Commercial rent can swing wildly even within a market so an expert can help set the right expectations before you ever talk to a landlord, and navigate the best deal for you.  \n\nMy number one rule is don\u2019t fall in love with a location before you negotiate the terms.   The perfect commercial location is a combination of qualities including accessibility, visibility, co-tenancy, demographics, and occupancy cost (not just face rent but total charges).    If you have a solid business plan you should know what you need for each of those criteria.   No \nlocation is perfect, but don\u2019t overpay on rent to get the rest, because regardless if you succeed, you will be stuck with that rent for a long time.", "replies": [], "depth": 3}, {"id": "hksqkfh", "text": "I'm on the asset management side (i.e. LL side) so perhaps agents can chime in...\n\nMy advice is you find your own agent.  There will be times your agent will show you something where one of their colleagues (or even them self) has an exclusive assignment on.  You shouldn't get too scared if this happens since although they work for the same 'house', the agents are generally competitive and have their reputation to maintain.  If your agent only shows their brokerage exclusives (or their own listings), that would make me think about switching to another agent.  \n\nIt's ok to switch agent once, but you do not want to switch horses multiple times or have multiple agents running around simultaneously because you will get flagged by the leasing community.\n\nYou may come across some buildings where the LL has their own leasing agent.  If you decide to go direct with them, there is a higher chance of conflict of interest, but then again, prospective TT might get a better deal.  \n\nNo matter what, work with an experienced commercial real estate attorney and make sure all your concerns are adequately addressed in the lease agreement.  Even if you know of real estate counsels, ask your agent for a list and interview them all to determine qualifications and whom you feel comfortable working with.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hkoyfy1", "text": "are you in CA?", "replies": [], "depth": 1}, {"id": "hkpmiij", "text": "Get a lawyer to review your lease. \n\nCommercial leases are VERY different than apartment leases that folks are familiar with. \n\nI\u2019ve seen some insane commercial leases that really put tenants in a bind. Usually folks are so happy to start their business that they sign anything the commercial landlord asks. \n\nMake sure you understand every single word of that commercial lease. Courts will hold the parties to pretty much whatever it says since they will view you as \u201csophisticated\u201d and you are presumed to know what you are doing when you signed it.", "replies": [], "depth": 1}, {"id": "hkpo8aq", "text": "You don\u2019t need at agent but do you have confidence on pricing? Happy to answer any questions you have, we do leasing nationwide https://youtu.be/CBl5Hh3lmw8", "replies": [], "depth": 1}, {"id": "hkpu8mz", "text": "If it's NNN see if you can get a cap on the increases every year\n\nAsk for an annual cap on repairs to hvac. Commercial systems can cost tens of thousands and you don't want to have to replace their old system when it breaks down your first year in.\n\nWhat kind of business do you have? If you're in a strip mall you might want to see about an exclusivity clause so they don't put a competitor right next to you.\n\nRead every line of the lease and remember everything is negotiable.\n\nAsk for a month or two free rent while you get up and running. I've always gotten free rent while I did the tenant improvements but I've had colleagues that negotiated 6 months free rent. Also, if you can't get them to come down on the price, see if they'll give you a lower price the first year and then catch up the difference in a later year.", "replies": [], "depth": 1}, {"id": "hkq2hl5", "text": "Agree with the advice of getting a broker to help you out in this endeavor. You certainly can go with one of the big four listed below; if in more of a niche market, look for a local broker who knows the area intimately. Some thoughts below\n\n&amp;#x200B;\n\n\\-NNN lease is the way to go, make sure that there are caps on CAM, insurance. You don't want the LL to be able to increase these as they please YoY. Likely not the case, but do a little research on your potential Real Estate Tax (RET) exposure. This could be quite a surprise\n\n\\-Free-rent is not always a given, but, would try to push for\n\n\\-Push for not paying rent until you are open and operating\n\n\\-If the LL believes in the center/your concept you should be able to get TA\n\n\\-If the box that you are looking at is not currently occupied/ has not been occupied for a while... try to get the LL to cover the cost of HVAC, bathrooms, etcs. The LL is going to need to get this space in rentable condition at some point. Why not have them do it now", "replies": [], "depth": 1}, {"id": "hkqbey9", "text": "Hire a business attorney, as has been said (form an LLC for the lease, review the terms of the lease, insert language for COVID stoppages, make sure you aren't getting fleeced on percentages due to inflation) and hire a tenant rep broker. Tenant rep brokers are generally paid by landlord so it won't cost you anything and they will know what concessions you should be asking for.", "replies": [], "depth": 1}, {"id": "hkqko2d", "text": "Triple net or not; common areas? upkeep? Other rando fees they like sticking in there.", "replies": [], "depth": 1}, {"id": "hksdmyj", "text": "I am a commercial broker in Phoenix and about 60% of what I do is tenant representation. Feel free to PM me and I\u2019ll see if I can help you or refer you to a qualified broker.", "replies": [], "depth": 1}]