How to choose commercial real estate

When you go looking for commercial real estate to provide the office space your business needs, Nitaa-Arora Parkes 10-step checklist will make sure you get the right office on the right terms.
When it comes to selecting new premises for your business, there are many factors to consider. Ensure you fully understand your business needs today and in the next few years. Before looking, develop a checklist of all the things that your business needs to succeed to take with you to all commercial property inspections.

1. Buy or Lease

You will have two options in acquiring office space: lease or purchase. Both options have advantages and disadvantages.

The answer to lease or buy is not an easy one. Your decision will hinge on financial, tax, and personal issues. Sometimes the obligations to a tenant can be more onerous and costly than to purchase. Make this decision with your accountant and financial planner to guide you with the best advice.

2. Location

Things to consider

  • Visibility to your customers
  • CBD, local business or business park
  • Parking: is there ample parking?
  • Proximity to suppliers and staff
  • Proximity to transport and shops
  • Accessibility for the handicapped

3. Size and accounting for growth

You will need to provide the commercial real estate agent with an approximation of the property size required, as well as the number of offices and other rooms. When viewing a property you need to work out how much usable space there is, and have an idea of how much space you need for each of the following:

  • Reception
  • Waiting area
  • Meeting rooms
  • Offices 14m2
  • Workstations 7m2
  • Utilities area for printer, copier, fax, mail
  • Kitchen
  • Data centre

You may want to consider adding another 10% to 20% to the calculated size requirements to allow for future growth, especially if you are considering a long term lease or purchase. This additional space can usually more than offset the cost of terminating a lease and moving to larger premises.

4. Security

Some items to take into consideration are:

  • Access times – do you need access 24/7?
  • What level do you want to be on, or don’t want to be on
  • How many exit doors do you need
  • Is the area safe and secure, with ample night-time lighting?
  • Are lighting fixtures in need of repairs?
  • Is there an alarm service or on-site guard?
  • Are police and fire departments nearby?
  • Where is the nearest fire hydrant? Are their sprinklers and smoke/fire alarms in the building?

These concerns not only affect you, your employees and your customer’s personal safety, but can also affect your ability to get insurance, the amount of coverage you can get, and your insurance rates.

5. Green rating

Companies are increasingly expected to demonstrate corporate social responsibility by “doing the right thing” in respect to the environment, employees and the community. Be aware of any additional costs a landlord may impose to make the building green.

6. Term

When considering the term of the lease, you need to remember that landlords like long-term tenants; so the longer the lease, the more concessions you may be able to negotiate in the terms and cost. However, you do not want to be locked into a lease that may not allow for your growth plans. Consider negotiating flexibility into the term, and options to allow for your company plans.

7. Building type

Most buildings are graded as follows and are priced accordingly:

Grade A: The most prized and sought after commercial office space for lease in the highest quality commercial building for rent.

Grade B: This commercial office space is popular because it is cheaper than grade A, yet maintained and finished to a good standard. This is the second highest quality commercial building available.

Grade C: These buildings provide functional space for tenants looking for lower rent.. Rankings can be highly subjective. These fit outs can be a much lower quality than a grade A or B building.

Also worth considering are Business Parks. Location and maintenance is important here, as run-down business parks can make your business seem less established, and can also be an indication of an unresponsive landlord.

8. Fit-out

Most premises will need fixtures, fittings and repairs done before you can occupy it and start to operate your business.

A fit-out can be a major cost item, especially if you have specific branding requirements for flooring, colours, finishes etc. Some fit-out costs, such as moving plumbing, are often overlooked; so ensure you have an accurate fit-out budget that leaves you with sufficient funds to operate your business.

9. Timing

How quickly do you need to move?

Allow time for delays in completing the fit-out. Check with the designer and builder about seasonal shortages in the availability of tradespeople (e.g. Christmas time). Try to negotiate an early access for fit-out prior to commencement of the lease, this will give you time to complete the fit-out before you start paying rent.

10. Finances

You need to set a budget upfront and need to incorporate the following costs to understand what your Return on Investment will be:

Costs include: Rent and rent reviews

  • Outgoings (or operating costs)
  • Bank Guarantee
  • Fixtures and Fit-out
  • Insurance
  • Maintenance

Nita Arora-Parkes is the owner of Location Relocation Pty Ltd.

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