Find out about the size and kind of signs available to you. If you are looking at space in a shopping center, look at all the other signs in that center. It is not mere coincidence that they are all the same size, same color, same image. The shopping center will probably have restrictions on your signage. City or local government may also have restrictions for your area. Even if they don’t have restrictions, taxes on the kind of sign you’re thinking about may be prohibitive.
Once you’ve determined that the location works for you, check to make sure the space meets your needs. Look at the construction of the building. If the building is old and in poor repair, it will cost you. Look at the size of the space, not just the floor space but the ceiling height. A ceiling height that works fine for an empty-hand style may be too low if your style teaches long weapons. Trace the outline of the space on some graph paper. Carefully draw to scale not just your training floor but your office, dressing areas, restrooms, storage space, waiting area. Are there any pillars in the space? Draw them in as well. Draw in your furniture, your training equipment, your traffic patterns, your entrance and exits. Will your students have room to train freely in the remaining space? If you need more space a few months or years down the line, does the center have room for you to expand?
Think five senses: Can the ventilation handle a large number of warm bodies? Do you have adequate heating and cooling? Is the light adequate? While you hold classes, where will the sun be in relation to your windows? What is the air quality like? Is the noise level acceptable? Spend some time with the site, especially during the hours you will be holding classes. Picture yourself training there to see how it feels.
Figure Out How Much It Will Cost You
It’s crucial you find out exactly how much a space will cost you before you start making commitments and financial projections. Notice, we didn’t say how much the rent will cost you. We said how much the space will cost you.
The landlord will probably quote your rent in annual price per square foot. A simple formula can calculate how much that means in monthly rent.
The rent, however, is not the total price for the space. In a triple net lease—one of the most common commercial leases—rent is only one of three expenses you must pay monthly. The other two are rental tax and triple net.
Rental tax may be assessed by your state or city. This tax is much like a sales tax—the government charges a percentage of the rent a landlord collects. The landlord passes that charge directly through to you. The rental rate tax varies widely from place to place. Ask your landlord how much it is in your area so you can fit it into your financial projections.
Triple net is the other expense you must pay with your rent each month. In some places, triple net is called “net, net, net.” In others, it is called “common area expenses” or “common area maintenance,” “CAM” for short. Triple net includes three expenses. The first expense is maintenance. This maintenance includes your share of the cost of managing the complex and of maintaining the parking lot, roof, signs, elevators, landscaping, and other shared resources. The second expense of triple net is your share of real estate taxes. The third is your share of any insurance your landlord keeps on the property.
Triple net is typically expressed in price per square foot just as rent is. Your landlord charges it annually but impounds it monthly. At the beginning of the year, your landlord makes an estimate of annual expenses. They divide that amount between the merchants in the complex (usually based on percentage of square footage). Then they divide your share by twelve so they can bill you monthly. At the end of the year, they check the actual triple net costs against the projections and either bill you for the balance due or refund the amount you overpaid.
Besides rent, taxes, and triple net, the terms of your lease may require you to take out your own property and fire insurance. Although you pay the cost of that insurance to the insurance company, it is still as much a cost of renting the space as rent is. Check additional insurance requirements as a part of your investigation into what the space will cost you.
Compare your rent with other comparable properties in the area. A real estate agent can help. Make sure what you will be paying is comparable to other similar spaces. Differences in price may reflect some crucial differences between complexes. Larger spaces and spaces with longer leases usually have lower square-foot prices. Older buildings and buildings in bad neighborhoods usually have lower overall prices. But some complexes are just a good deal. Either way, comparing prices helps you determine whether a space is worth what you are going to pay for it.
Negotiate a Lease You Can Live With
Once you’ve picked out a space, it’s time to get the lease nailed down. Unlike many apartment leases, commercial leases typically have some “wiggle room.” In other words, a certain amount of negotiation over rent, improvement to the space, payment schedules, and other provisions is not only possible, it’s expected. In fact, most commercial lease contracts are initially biased toward the landlord. It’s your job to protect your interests—not to make the contract biased toward you, but to bring it back to center, where it is fair to both parties.
What do you do if you want to lease a commercial space and you aren’t a very good negotiator? First, make yourself comfortable with the issues involved in your lease. Read as much as you can about commercial leases. Talk to commercial real estate agents and brokers while you’re looking at sites to learn as much as you can from them. Once you have the lease in hand, take it to a real estate attorney. She can look over the contract for you to make sure it protects your interests. Then read the lease yourself. Make sure you understand everything—every word, every provision—in the contract. Know what you are getting into before you begin negotiating.
If you still aren’t comfortable with the actual process of negotiation, you can get help. Commercial real estate agents are used to negotiating contracts. But remember, your real estate agent gets a percentage of the rent they negotiate. Their commission is paid by the landlord. During the negotiation process, real estate agents are generally very professional, but they do walk the fine line between keeping you happy and keeping their commission high. If you’re uncomfortable using your real estate agent as a go-between in the negotiation, you may be able to get a friend with real estate or negotiation experience to help you. Or you may want to hire your accountant, a broker, or a real estate attorney to represent your interests. They cost money, of course. But if they know the business, they can often get you a better lease than you could get yourself. However, once you’ve signed the contract and paid any outside consultants you’ve hired, you are on your own. Your representative doesn’t live with the results of the negotiation; you do. It is your responsibility to weigh all your options and then to live with your choices.
Basic Negotiation Principles
When negotiating a contract remember two things. First, in the world of contracts, if it isn’t on paper, it isn’t “real.” Your landlord is not legally bound by anything they say, only by what they write down and sign. Second, you are not negotiating only with the person across the table. Your landlord may be a very pleasant person, a person of their word, a person you can trust. But you are not only making the contract with them. You must assume that the contract will be referred to and used by others: by the landlord’s business partners, his attorney, anyone the landlord might sell the property to, the courts that may have to be involved should there be a dispute or bankruptcy. The contract must be able to exist as a stand-alone document, a document that protects your rights no matter what should happen or who should get involved later.
Tradeoffs and compromises are the name of the game in contract negotiations. Think about what you bring to the table before you sit down. One bargaining chip you have is the business you will bring to the center. Think about what your landlord wants. They want stable, professional tenants who can fulfill the terms of their contract and pay their rent on time. They want