June 16, 2021 - National Retail Group

Leasing commercial property for small business – 4 Factors to consider

Leasing commercial property for small business

It can feel a little overwhelming when deciding on where to invest in your next commercial property. Between so many properties available on the market, deciding on who to lease through and how to go about obtaining your lease – it’s safe to say that you’re spoilt for choice when it comes to all of the information out there!

Here, we will look at the different types of commercial properties you can lease and discuss the factors you should take into consideration before signing a lease agreement.

Commercial properties are usually split up between three categories: office, retail and industrial. These categories include professional office spaces and buildings, retail shops and outlets, industrial warehouses, service stations, car washes and mixed residential such as hotels or Air BnB.

Commercial property leases can include various terms and incentives such as fit-out opportunities, being close to day and or night trade, local amenities, and national retailers. Each of these opportunities can prove to add to your chosen property being an overall great investment for your business, however you should be aware of a few critical factors that can help influence your decision before signing that dotted line.

Size of the property

Searching for a property that’s the right size for your business is critical and can require some calculations on where your business is at currently, and any plans to grow in the near future or while during your lease term.

Another factor to consider when it comes to the size of the property, is the cost of rent. Rent is calculated by per square meter, and the property is usually advertised as a dollar-per-square-meter-figure. You may have seen properties advertised either by per annum or per month, but it is important to note that this figure is generally exclusive of GST.

Depending on how the property’s rent is advertised, it would likely come under one of two options: net lease, or gross lease.

Net lease is usually much more affordable for a tenant, however this option does exclude all outgoings, and this is clearly outlined to the tenant in the lease agreement as an extra cost to them. It is up to the tenant to invest in any fit-outs needed, as well as building maintenance and cleaning costs, building insurance, rates, land tax, and any management fees.

Gross lease is usually inclusive of all major costs and covers everything net lease does not. As this cost is substantially higher than a net lease, it usually comes with incentives for tenants such as free first month’s rent or rent waved for a period of time, rent abatement, or fit-out opportunities which the landlord will cover. Sometimes, there will be multiple incentives included in your agreement and can comprise all three of these options.

Rent and incentives are usually dependant on the stability of the current market, however it is important to be aware that as a tenant, you can negotiate both rent and incentives prior to committing to or signing a contract.

Look for Future Options

Elaborating further on one of our previous points: when scouting a new office space for your business, for example, and assessing the potential for business growth – factoring in prospective new employee hires during your lease period should be a consideration when looking for your new commercial property.

When inspecting your new property prior to signing a lease, consider if the space is large enough to accommodate for both existing employees as well as where any new employees and their workstations may need to be fitted.

Also, when inspecting the property, ensure it is fit with the amenities you will need for your business to run smoothly, or if there is enough space to install these amenities. For example, is the property inclusive of existing restrooms, or is there adequate space for these to be fitted-out? Is the property complete with a kitchen, or is there ample space for one large enough to accommodate for all of your employees during high-traffic times such as breakfast and lunch hours? Assessing department and storage space, as well as areas for meetings, is also critical and your new office space should offer adequate room to cater for this.

If your new office comes with sufficient space for fit-outs of amenities, clauses of conditions or building in your designated space should be outlined in your lease agreement. Defining the alterations permitted during your tenancy, and who should bear the cost of these expenses, should be discussed and outlined in writing. As a tenant, you are able to negotiate these until both yourself and the landlord are in agreement of the terms.

Lease to Purchase

If it turns out that your leased property has proven to be a positive financial investment, you may start thinking about your lease to own options. There are however both advantages and disadvantages to owning a commercial property, let’s look at some of the most important factors:

One of the advantages of purchasing your commercial property, is that it becomes your asset.
This means that you are able to sell the property if you choose, or lease it out. If the value of the property goes up, you may end reaping great financial benefits.

Another advantage is that you have complete control over any internal, and sometimes external, changes to the property. This is beneficial both for making any changes that are in line with your business and it’s growth, or for increasing the value for re-selling or leasing.

Owning a commercial property can further aide in streamlining your finances as a fixed loan option, as opposed to paying rent, usually never wavers. This allows you to factor this cost into your monthly bookkeeping as a consistent payment which can allow for easier planning of the future.

There are of course disadvantages which come from owning your business’s property, the first of which being a large upfront cost for the deposit is required, followed by undertaking a considerably substantial loan from your bank or credit provider which can be a big financial commitment.

As discussed previously when planning for your future, when owning a commercial property, your options are considerably limited when it comes to if your business grows rapidly during your ownership. There could be issues with accommodating business’ growth or with selling the property itself if needing to purchase new premises.

Ongoing and increased costs are a factor to take into consideration also when looking to buy your commercial space. Although some tenants do bear outgoing costs, in some instances this is the responsibility of the landlord. You should factor in potential maintenance works, regular cleaning, rates, land tax, and any extra fees that can be incurred by owning a property.

How the National Retail Group could help you

Here at the National Retail Group, we make it our mission to ensure that as a tenant, you are aware of all of your options, and offer complete transparency when working with you to find your dream property.

Whether you’re new in the market and looking for an office, retail, or medical / consulting space, or perhaps are a seasoned commercial leaser, we offer White Glove Transactions and Asset Management Services for our tenants and landlords.

Possessing an extensive portfolio of leased properties and a wide array of commercial properties currently available, we have the necessary skills and connections throughout Australia that will exceed expectations in helping you find the perfect property fit for your business.

Enquire today and let’s have a chat to discuss what you’re looking for, and work together on how we can help your business achieve further success.

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