5 Commercial Real Estate Due Diligence Tips

In this article, you'll learn:

• How technology can streamline your commercial real estate due diligence.
• The benefits of working with a tenant representative broker.
• The importance of understanding local zoning regulations and laws.
• Why starting your due diligence early and verifying space measurements are crucial.

The term due diligence may instantly spark visions of pouring over complicated data and hours of painstaking research; however, it's important that you don't forgo the process. Thorough due diligence can help to ensure that you make the best decision about where to lease commercial office space and that you receive a fair deal from your potential landlord. To simplify the process, follow these tips:

1. Reap the Benefits of Technology

Commercial real estate software and online services can save you tons of time when it comes to due diligence by providing you with the latest market research. The information that you can glean from the right program or service can help you choose the best location for your new office, give you an edge at the negotiating table and allow you to analyze offers from prospective landlords armed with data on market trends.

Technology can also streamline much of the administrative work related to due diligence. You can use secure cloud sharing to distribute key documents to every member of your team and web conferencing tools to discuss concerns anytime, anywhere.

2. Enlist the Help of a Pro

Tenant rep brokers are incredibly valuable during due diligence. With their knowledge of the market and their history with various landlords, they can provide you with expert advice that will cut down on research time. Plus, reps often have access to buildings that have yet to be advertised to the public and can advocate for your company during lease negotiations. Tenant representatives are paid by landlords, not by tenants, so benefiting from one won't incur your business any extra expenses.

3. Don't Forget About the Law

Zoning regulations and local laws may dictate where you are able to establish your office. Be sure to carefully review the regulations in any location that you're considering. Relying on the landlord to know whether or not your business can legally occupy their building or space could lead to catastrophe. You don't want to end up signing a lease only to find out you can't move in. Remember that laws and regulations are prone to frequent changes; make sure you're consulting the latest versions during your due diligence.

4. It's Not Too Soon to Start

Don't underestimate how long thorough due diligence can take. If possible, get started one year to 6 months before you intend to occupy your new building or office.

This will ensure that you have enough time to conduct preliminary research, compare prospective spaces, conduct due diligence on specific landlords and buildings and negotiate a fair lease.

5. Break Out Your Measuring Tape and Calculator

Before you begin negotiating a lease, take the time to measure the office space yourself. Since your base rent will be calculated on the basis of the square footage, it's important to double check that the size stated in the lease is accurate.

Once you have arrived at a square footage, crunch the numbers to ensure that the base rent is correct. You should also ask the landlord how the load factor for tenants is calculated and do the math yourself before signing the lease.

Download our Guide to Office Leasing Due Diligence to Learn More!