Retail Leasing - What to Keep in Mind for Prospective Tenants

Commercial Real Estate Investing From A-Z

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What are some things you need to keep in mind when leasing your property? Why should you put your prospective tenant's hat on? What are vacancy rates looking like today? Raphael Collazo, a retail real estate agent, shares his insights.

You can read this entire interview here: https://bit.ly/3fhLRv1

Investors and commercial leasing brokers have to put a hat on of our potential tenants, why don't we go into each step of your book and dive into some areas of it?

First we talk about why you need commercial space in the first place. I've had a lot of conversations with people who like the fact of having a commercial space, it's a validation of them having made it, but in reality, they may not even need a commercial space. If you're a web designer, why do you need a commercial space, it's more of just fluff for you. On top of that, it may not be in your budget, your business may not be able to support you having a commercial space yet. Having that conversation early on is important so that you understand that maybe it's not the right time. And that's okay, it's actually better to know that now versus you getting into a commercial lease for three to five years, and then having that financial commitment for another three to five years.

Then we review what you need to prepare before you get a commercial space, a lot of it is providing financials, if you're a newer business, or you haven't been around as much as some of these more established businesses, put the investor hat on, why would the landlord want to lease space to a potential business that doesn't have a track record of success, that's very risky for an investor. If there's a 2,000 square foot space, going for $2,000 a month, and you have $40,000 in reserves, your business is producing this, we can support this type of payment, it's getting ammo in the cartridge, so that as you go out and look for commercial space, you become a more attractive tenant to investors.

Then we go through the process of narrowing down your list of criteria: how do you negotiate commercial leases, some of the provisions you need to keep in mind as you're looking at commercial spaces. And then at the end, we talk a little bit about once you get to the point of getting the lease signed, what are some of the build outs involved if you need a build out, and then we share some marketing strategies, and at the end, we have a call to action saying Now take the action, do it.

And when they go ahead and do it, what are some of the things that they should be aware of with regards to negotiating that lease?

As a landlord you want to pass along some of the main responsibilities over to the tenant, because you don't want to have to deal with getting calls for toilets and whatever else. That's part of the reason why you're investing in commercial real estate versus multifamily real estate. They want to be able to be a little bit more passive. Along with that, as a business owner, they don't consider the big ticket items, the landlord could pass along the responsibility for the furnace, the AC, if there's an elevator involved, maybe they're also passing along that responsibility. And you don't know that unless you read the lease.

If you're in a multi tenant center, a lot of times you have to consider what's the competition in that center, because you don't want to be a liquor store, move into a multi tenant center, and then all of a sudden, next door, they allow another liquor store to move in. Have some form of exclusivity, and a sublease clause just in case.

Raphael Collazo

www.raphaelcollazo.com

www.linkedin.com/in/raphaelcollazo

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