Like many industries, the world of commercial real estate is its own community. It has its own business practices, its own language and its own sometimes-closed set of people. If you are one of the many people that ended up in the business as a user instead of a practitioner, here is a list of some commercial real estate concerns to keep in mind.
1. Everyone you deal with is sophisticated
Have you ever seen a job posted for a commercial real estate broker at one of the large global firms? Probably not. People in the industry grow up over a period of many years. As such, the people you're negotiating against are typically extremely experienced and knowledgeable. Furthermore, because the commercial real estate world typically requires both buyers and sellers and landlords and tenants to take responsibility for aggressively representing their own interests, you will need to come into negotiations ready to compete on a lopsided field.
2. Your space isn't as big as you think
If you buy a half-gallon of milk, you get 64 fluid ounces of it. Two-bedded room for seven nights? As long as the hotel isn't overbooked, you'll get what you asked for. And, if you're lucky, some mouthwash. But, as if you didn't have enough commercial real estate concerns, your 3,000 rentable square foot office will be smaller than 3,000 square feet.
What's going on? It's simple. The landlord includes your proportional share of the hallways, lobby, restrooms and other amenities in the rentable square foot measurement that he quotes for marketing purposes and that use used to calculate your rent. To find out how big your actual space is, ask for its usable square footage.
3. Your rent is more than you think
What you pay for your space is probably one of your biggest commercial real estate concerns, and as with your rent, it probably isn't going to be what you think it will be. For most office buildings, rent is just one of the charges that you pay. While the rules vary from market to market and from building class to building class, you can expect to pay at least a portion of your building's operating expenses. For instance, many full service rents include the rent and a portion of the building's expenses, but you are responsible to pay any costs that go above that baseline. In a triple net lease, you pay your rent and your share of all of the building's expenses. These can include property taxes, building insurance, utilities and maintenance.
4. If you aren't early, you're late.
Deadlines are serious commercial real estate concerns. While landlords can be very accommodating if they want you to stay, when markets (and competition) heat up, you could find yourself in competition for your own space. If you miss a deadline to notify your landlord of an intent to stay -- or to pay your rent -- you could find yourself out on the street. With this in mind, it's always best to hit every milestone early.
5. Choose your friends wisely.
If you didn't hire the person that you're working with, they probably aren't your friend. Furthermore, if the person you hire isn't an expert, they're probably going to hurt your interests. An attorney isn't good enough. You need a real estate attorney that specializes in commercial transactions. One of the best ways to alleviate these commercial real estate concerns is to hire an experienced representative to guide and represent you. The best part? That help won't cost you anything since the other side pays his or her fee.
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