Newspaper article Sarasota Herald Tribune

Ins and Outs of Leasing Your Commercial Space

Newspaper article Sarasota Herald Tribune

Ins and Outs of Leasing Your Commercial Space

Article excerpt

IF YOUR CURRENT LEASE is expiring this year or you have a start- up, you will have to consider what your needs are for commercial space. This could be retail, office, incubator, industrial or warehouse space or a combination of these, often labeled mixed-use.

Things to consider when leasing space: How much space you need, what locations to consider, how long to lease, how much you can afford, and what other factors to be considered?

Leasing space may be your single biggest expense. This is an area where you should work with professionals specializing in commercial real estate and who know the local market.

Do you need to lease space? Depending upon the type of business you have, can you begin by working from a spare room at home? The positives: This will save you commuting time, auto expenses, utilities, insurance, lease payments and taxes. The negatives: Will you have a barking dog or crying baby in the background as you talk on the phone? Can you "go to work" and not be distracted by your home environment?

If you need to have professional space, then you have options of either buying a building, or leasing or sub-leasing the type of space needed for your business.

Buying versus leasing

If you have sufficient capital, buying a building may be a great choice. You will have flexibility, financial incentives and the opportunity to build equity if all goes well. Most new businesses will not and probably should not go this route.

But partially owner-occupied buildings can result in landlords using the space they require and leasing the remainder to other tenants. This can provide a revenue stream and perhaps generate enough cash flow to make your space essentially free.

As your business grows and your space needs change, you can choose to occupy additional space in your building, assuming more square footage as your tenant leases expire. Eventually, you may be the only tenant in your building (owner occupied) and, hopefully, your building will be worth substantially more than you paid for it.

When it comes time to sell your business, you may decide to keep the building as an income- producing property. Being able to provide favorable lease terms to a prospective buyer of your business may help you sell the business faster and for a higher price.

Tip: Keep real estate owned as a separate business entity.

Leasing space

How much space should you lease and for what term?

If you anticipate rapid growth, such as doubling your business in a year, then you should opt for a short-term lease. You may pay a little more per square foot, but you have the flexibility to either renew on or before the lease termination date, perhaps at a slightly higher rate, or move to a different location.

Tip: For a rapidly growing business, keep a short leash on the lease, with a one- or two-year horizon. …

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