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7 Trends Influencing Commercial Real Estate in 2021

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Savvy real estate investors are constantly gathering and analyzing market trends to make wise business predictions. Trend analysis provides data-based evidence to help inform your strategic decisions for a competitive edge and prosperity in the commercial real estate market.

Most businesses experienced a rough time through 2020 as COVID-19 disrupted almost all sectors of the economy. The pandemic has a significant influence on today’s commercial real estate market. However, some of the changes we are seeing began several years back.

We’ll look at the latest trends in commercial real estate and suggest some investment opportunities you can seize.

7 Trends Influencing Commercial Real Estate in 2021

If you’re looking to invest in commercial real estate this year, below are some vital things to know.

Interest Rates are Low in 2021

The Federal Reserve will maintain low short-term interest rates throughout 2021. According to officials, interest rates will remain near zero until at least 2023. At least for now, no major bank has expressed an intention to hike interest rates in the United States.

This deliberate action will hasten the country’s economic recovery and encourage commercial borrowers to continue investing. Consider borrowing at this time to purchase commercial real estate to enjoy low annual percentage rates.

Distressed Property Sales and Rent

Most people thought that 2021 would be better economically than 2020, but the year hasn’t been promising for everyone. If you look at history, you’ll realize that recovery from a recession takes time.

As such, borrowers, especially those in the hardest-hit groups, will have a hard time getting back to business. For instance, the hotel industry will remain unattractive for the best part of the year as people continue social distancing. It will reduce the demand for such business premises.

Additionally, the lowest social-economic groups will struggle to recover, forcing some of them to close down. Large retailers like Walmart will have better chances of survival than small shops and local restaurants.

This disparity has spilled over to the commercial real estate market. Currently, there are many vacant mom-and-pop shops, leading to a downward trend in rent prices.

Plenty of Cheap Office Space

COVID-19 contributed to an influx of teleworkers as companies encouraged employees to work from home. A 2020 survey by Gartner revealed that a whopping 74 percent of CFOs were planning to shift some workers to remote work permanently.

Further, employees seem to be happier and more engaged since they started working from home. According to a recent study, 70 percent of workers reported more job satisfaction when working remotely.

With employees opting to work from home, there has been an increase in unutilized office spaces in many organizations. CoStar Group found that corporates added a record 42 million square feet of office space in the commercial real estate market within the second and third quarters of 2020.

Many corporate tenants are subletting their unused office spaces to reduce wastage. Consequently, office spaces have become readily available and relatively cheaper than in the past. It may not be the best time for investors to engage in the business.

Homeowners Want the Suburbs

COVID-19 has also accelerated the real estate market in the suburbs. One reason is the adoption of remote workforces by many organizations.

Traditionally, workers chose condos near their office buildings in cities to avoid long commutes. With the flexibility of working from home, employees are leaving smaller city dwellings for more spacious homes in the suburbs.

Pandemic-related lockdowns have also contributed to the rising demand for suburban homes. Families are finding downtown apartments congested and unsafe since they are spending most of their time indoors. They want more space and affordable amenities for their loved ones.

Besides being relatively larger and cheaper, suburban homes offer more outdoor space. Homeowners have also lost interest in some city attractions like malls and restaurants because they are either closed or running at partial capacity. 

Affordable Housing Still a Concern

Millions of Americans can’t afford safe housing. According to the latest census data, the United States had about 580,466 homeless people in 2020. While homelessness was steadily declining since 2007, the numbers started rising again from 2019.

The condition may have worsened due to the coronavirus pandemic. According to the National Apartment Association, owners of smaller and Class C apartments have reported increasing delinquencies in their properties over the COVID-19 period.

Overall, many low-income earners are in dire need of better housing. You can consider investing in affordable dwellings for the community.

Endless Commercial Real Estate Opportunities in Sustainable Building

Many nations consider sustainability integral in propelling the planet toward green recovery sustainable wealth. According to the IEA’s report on world energy investment, the world injected $240 billion into energy efficiency efforts in transport, buildings, and industry sectors in 2019.

Sustainable building will intensify in 2021 and the years to come. Experts predict that the United States green building market will reach $99.8 billion by 2023.

Socially responsible investors can consider venturing into the green building market. If you don’t know where to start, try the education sector. It owns 17.2% of green buildings in the country.

SMEs to Present Commercial Real Estate Investment Opportunities

While some organizations are busy cementing work-at-home formulas, others want their employees back to the office the moment it’s safe. Examples are businesses that thrive on in-house operations. 

The government is also keen to see small and medium-sized businesses back on their feet. The House passed the American Rescue Plan in March 2021, a coronavirus relief law that will benefit small businesses with $1.9 trillion. 

Some SMEs might utilize the stimulus to expand their business premises. Industrial sectors like life sciences, warehouse operations, and network infrastructure have been doing well despite the pandemic.

If you’re a commercial real estate investor, stay hawk-eyed on businesses that might need new buildings and grab the opportunity. Consider leasing office space toward the end of the year or work with a real estate investment trust (REIT) for long-term gains.

New Commercial Real Estate Business Ideas

The economic disruption witnessed in 2020 introduced innovative real estate solutions that caught many by surprise. Let’s highlight a few business opportunities that real estate investors can implement this year.

Commercial PropTech

Also known as PropTech, property technology focuses on digital innovations that ease asset management and increase efficiency in properties. As a real estate investor, you can use PropTech to research, purchase, sell, and manage real estate.

A warmly lit dining room with four chairs around a wooden table and a digital overlay smart home concept with a house icon surrounded by home automation icons
There are near endless applications of property technology.

You can also upgrade buildings to make them more marketable and comfortable for users. For instance, a smart thermostat can learn your room temperature preferences and adjust the heat automatically when you arrive in the office.

On the other hand, smart locks allow you to lock your building and walk around without a key. You don’t need to worry about losing your keys.

If you rent vacation homes, keyless locks allow smooth check-in for guests. Give your clients a unique code to unlock doors and change it as soon as they check out.

Explore the latest property technology and adopt what makes your life easier.

Last-Mile Distribution Outlets

Last-mile distribution hubs existed before, but they became more popular than ever amid the COVID-19 due to increased online shopping. 

Essentially, these are the last stop points for goods before merchants can ship them to the buyers’ homes and offices. The buildings are usually in strategic areas in populous cities like Jackson for a broader customer reach.

Many merchants, including large-scale retailers, are converting their stores into last-mile distribution centers. You can acquire brick-and-mortar stores and retrofit them to become last-mile product distribution hubs.

Ghost Kitchens

If you haven’t heard about ghost kitchens, these are catering kitchens designed to fulfill food delivery orders. They are a new concept that commercial real estate investors can implement this year. How do they work?

A catering team rents a kitchen space from a landlord, preferably in a densely populated area. They list their brand on an online platform and start getting orders. From there, they prepare meals and deliver them to customers.

Micro-Unit Apartments

A micro-unit is a small suite, usually a single room unit designed to provide the bare essentials of an apartment. They often come with a living-cum-bedroom area, a kitchenette, and a small bathroom.

The houses are ideal for low-income individuals looking for a safe dwelling. Due to the compact size, micro-units are cheaper for tenants than ordinary, single-family units. The owner can also charge a relatively high price per square foot.

You can develop micro-units as single-room apartments or convenient guest rooms for businesses such as restaurants.

Multi-Family Conversions

Another real estate trend an investor can consider is the fabrication of business buildings into multi-family rental complexes. It has become increasingly accepted due to the rising construction costs.

Target large properties like hotels, factories, malls, and office buildings that have closed down. The advantage of such facilities is that they are often in strategic areas for homes. Additionally, you can modify them at a considerably lower cost than erecting a new construction.

Find Commercial Real Estate Help in Jackson, MS

Are you a commercial real estate investor in Jackson, MS looking for help with property acquisition, sale, and management?

Speed Commercial Real Estate is a seasoned property sales and management company that has served Jackson, MS area for over 17 years. We can devise a well-thought-out marketing and leasing plan for your property to maximize profits and give you an edge over competitors.

Contact us for commercial real estate help tailored to your needs.

Top 5 Mississippi Commercial Real Estate Trends in 2021

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Mississippi is expected to be a commercial real estate investor’s best friend in 2021 because the state has managed to “buck”  the national trend and attract buyers to invest in the area’s affordable real estate, particularly in the Jackson area. This is in large part due to attractively low interest rates, which have dipped to levels rarely seen since the 2008 financial crisis. This is helping shape some very lucrative commercial real estate trends for 2021. Take a look at the top 5 investment strategies to yield an optimal ROI for the upcoming year. 

1. Warehouse Space

In a typical year, stores house a lot of inventory, yet 2020 was anything but typical. Social distancing has completely altered the market landscape, and now people are buying online in droves. In fact, e-commerce sales rose 30% during the first half of the year as compared to the same period in 2019. This shift in how consumers spend their dollars is helping drive businesses to move inventory from retail shopping complexes to warehouse storage spaces in order to quickly ship to homes and businesses without breaking health distancing guidelines. 

While we predict some decline in online sales during 2021 as social distancing restrictions begin to lift, there are still millions of people who are limiting their in-person retail shopping while COVID-19 treatments are being developed and delivered. This means that the main focus in 2021 will continue to be at-home web purchases until treatments become widely available and the growing number of cases begins to decline.

warehouse-space-with-large-brick-loading-area

This is why warehouse space is already in such high demand across the country, especially for essential businesses such as groceries and distribution conglomerates. The Jackson, Mississippi market is an ideal locale for investors looking to take advantage of the latest commercial real estate trends because of our large commercial warehouse inventory that helps keep prices highly competitive. We also have a centralized location for optimized regional distribution that’s highly attractive to potential lessees.

2.  Manufacturing Space

Similar to the warehousing sector, commercial manufacturing space is expected to be a prime investment strategy as production needs increase due to the large volume of online purchases. People are spending much less on activities such as travel, and much more on health and wellness products, food, and home goods like furniture and kitchen appliances.  Online auto sales have also been a large contributor to the growth of e-commerce in 2020, and this is expected to continue into a new wave of growth.

In Mississippi, the greater Jackson community is home to nearly 500 manufacturers, and the city and state have set in place marketing incentives aimed at attracting additional auto, food, furniture, and other producers to the region. These incentives include wages that allow for both high profit margins and a good standard of living for employees due to the area’s competitive cost-of-living. Mississippi also offers same-day driving access to over 50% of the country and a sophisticated distribution network.

The best news? Completed industrial space is expected to increase by 29% in 2021, making it the perfect time to invest in manufacturing property in the state.  

3. Flex Space

Flex Space is perhaps the biggest of the commercial real estate trends sweeping the 2021 market. According to JLL, it could account for one third of commercial real estate portfolios by 2030.  Many businesses have transitioned their teams to at-home roles due to COVD-19 social distancing restrictions. Because of this, leaders are now beginning to understand the cost-saving benefits of moving out of traditional office leases and into shared spaces that reduce company overhead. 

With Flex Space, businesses share square footage with other companies in order to save money on the lease, as well as to reduce property tax, insurance, and repair costs for single, double, and triple net leases. The terms for this type of lease are typically shorter than traditional office agreements, and shared amenities include WiFi, meeting rooms, lounge, kitchen, and warehouse space. The spaces themselves are multi-functional, and may incorporate an office, warehouse, manufacturing space, research center, and retail store. 

Likewise, multi-functional businesses that weren’t considered essential during 2020, such as salons and personal services, are expected to make a comeback in 2021 as social distancing restrictions are lifted.  In addition, those in emerging industries such as cannabis providers often find sharing space with fellow tradespeople appealing because it allows them to pool their resources while providing a sense of community. The newly formed Mississippi Cannabis Trade Association is one such example of a group of community advocates leading the way in forming a more cooperative way of doing business that allows for higher profit margins and greater ROI for investors.

Any properties with flexible space are seen as ideal for leaders in such organizations, as they allow for a quick redesign to accommodate shifting business needs, and provide the opportunity for cooperative environments that help cut costs for those in the launch or recovery phase of production.

4. Modifiable Restaurant Space

Because full-service restaurant operators took such a hit due to the social distancing shutdowns, many restaurant spaces with kitchens, check-out counters, display cases, and full-service dining rooms are sitting empty. Entrepreneurial-minded food industry professionals are expected to make their move by re-imagining these spaces as carry-out havens, with plenty of parking spaces for the now booming curbside crowd, and drive-thrus that take advantage of the double-digit increase in these types of visits, even as dining rooms began to reopen.

The added benefit of modifiable space is that, once restrictions lift, restaurant managers can again provide customers with a full-service dining experience. Jackson is already known as a culinary mecca,  with a well-deserved reputation for sumptuous Southern fare that will continue to attract visitors and locals alike to its charming restaurant scene in 2021. This will help make the area’s restaurant space one of the most exciting commercial real estate trends of 2021 for investors willing to include modification clauses in their leases.

Your best bet for success? Offer flexible percentage leases that allow restaurateurs to pay you a percentage of their sales each month as the economy recovers.

5. Small Office Space

Different from Flex Space, small office space allows one company or group a high degree of privacy and quiet, while still providing a professional environment for conducting business. Many professionals who have been juggling multiple responsibilities at home, including home-schooling, additional cooking due to restaurant shutdowns, and transitioning to a home office, are eager to move back into a dedicated space of their own that allows them to put maximum focus on their clients and workload.  

Combine this with the fact that employers are now more willing to allow staff members to work from anywhere in the country, and you’ve got a recipe for investing success when it comes to small office space. Many of these business leaders are seeking a centralized place for regional staff members to work in order to increase productivity and create the kind of face-to-face collaborations that breed innovation.

Three regions in Mississippi are considered especially attractive to new residents, including Jackson, Memphis, and the Gulf Coast. Each had sizable population increases due to the advantageous cost of living in these regions. Focusing on properties in these parts of the state is a great strategy for discerning investors looking to take advantage of commercial real estate trends. 

Top 3 Tips to Take Advantage of 2021’s Top Commercial Real Estate Trends

1. Offer short-term leases. Many people are still recovering from the economic downturn, and short term leases allow for re-entry into the market while also protecting everyone’s bottom line. In other words, it lowers your risk for long-term losses. Because it’s also an attractive option for the thousands of business owners who are in economic recovery, you shouldn’t have any issues extending the lease once it expires, or finding another short-term lessee for your property if the original lessee’s financial situation changes.

2. Allow for subleases. This helps ensure that you’ll continue to collect funds outlined in your agreement, even if the initial lessee can no longer pay the whole amount themselves. More importantly, if your lessee finds they need a larger space to expand, they’ll be more likely to look to you for a better option if they know that you’ve included a sublease clause that ensures they won’t be financially tied to two spaces.

3. Be sure to find a reputable real estate agent. Having a savvy marketing plan in place that takes into account local industry trends in order to attract just the right clients to your space is vital. An established agent will also provide you with a well-organized portfolio of up-to-date repairs, service contracts, and warranties for any building or space you invest in. This allows you to provide lessees with attractive options such as a triple net contract to help save them money on monthly rent costs, while also mitigating their risk of costly repairs to the property. 

Speed has over 17 years of experience serving commercial real estate investors in the Jackson area and beyond. Contact us today for assistance in securing, developing, marketing, and managing the best properties to optimize your profits.

3 Exterior Upgrades to Reduce Turnaround Time at Commercial Properties

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For CRE owners and investors, nothing is more important than a fast turnaround time between tenants. Let’s take a look at how exterior upgrades can help you achieve that.

Here at Speed Commercial Real Estate in Jackson, we work with commercial property builders, investors, and owners. We know vacant spaces burn resources. Today, we’ll take a closer look at those losses.

Then, we’ll show you the benefits of some finished exterior upgrades. Because an updated look (and an outdoor workspace) can help you keep CRE leased all the time, to the right sort of tenants, with only the shortest of turnaround times.

We’ll cover aluminum railings, wood-alternative columns, and outdoor pergolas (to bring the office outside.) But before we get into any of that, let’s get a clear understanding of the actual costs associated with vacancy.

How Much Does it Cost to Maintain Vacant Commercial Space?

CRE costs vary state to state, city to city, and even within a neighborhood. A vacant high-rise in Los Angeles is undoubtedly going to cost more to maintain than an empty space in Nebraska. Here in Jackson, we’re lucky to have some of the most reasonable CRE in the nation. 

Regardless of location, CRE investors are all going to face the same types of overhead costs associated with vacant units:

  • Property Insurance & Liability — Whether currently leased or not, you’ll need adequate insurance coverage in case of fire or other perils. From your insurer’s perspective, vacant properties bring added risks (like squatters), which in turn, bring an increased risk of fire, vandalism, malicious mischief, and injury. If a commercial space is vacant for more than a few months, your commercial property and liability insurance rates are likely to increase substantially!
  • Property taxes — Whether it’s leased or not, your state will still be looking for property taxes. 
  • Utilities — Vacant CRE still requires minimum utility costs. Water, electricity, gas… utilities add up! Most landlords can’t turn off utilities at a commercial unit, because this brings a risk of other maintenance issues like frozen pipes or vandalism in an unlit space.
  • Security — Depending on your location, security services at CRE locations can cost well over $1 per square foot every month.
  • Vacancy fees to property management — Not all property management companies charge a vacancy fee, but according to Upkeep Media, those that do usually charge an average of $50 per month, per unit. These add up quickly. Five vacant spaces would cost you $250 a month. 

As you see, vacant CRE costs landlords more than just the loss of rent.

Now, let’s switch gears and talk about updating your exteriors. 

How Quality Exterior Upgrades Reduce Turnaround Time at Commercial Properties

In the US, the commercial real estate industry is worth about $1 trillion. It was a hot market before COVID-19, and this time last year we expected the CRE market to grow about 4% annually for the next few years.

Obviously, things have changed. COVID has struck down many small businesses and forced them to shutter their doors. But remember, there is always a Renaissance after a pandemic. Rather than spending time chasing the almighty dollar running loops in the rat race, future entrepreneurs are sitting at home, honing their skills, imagining new concepts, products, and services to bring to the world.

When this pandemic situation is finally over, you can expect a surge in artisan works and entrepreneurship. These folks will be a whole new generation of entrepreneurs. They’ll need CRE.

And these young businesses will be choosy about their space! American consumers are better educated than ever before. We have technology at our fingertips 24/7, and can do the initial research for office space or warehouse space from our living rooms.

In such a “techy” and artistic climate, young business will make significant investments in their company image. And both the neighborhood they choose and the commercial buildings they ultimately select will speak to their uplifted ideas.

What Will Commercial Tenants Look For After COVID-19?

When shopping for a new location to lease, most business owners consider details like:

  • Location & accessibility to infrastructure 
  • Operational costs and utilities
  • Usable square footage and a pleasing layout (both inside and out, more on that in a moment)
  • Affordability and fair rental value 

Furthermore, tenants are more concerned with the environmental aspects of their location than ever. They’re likely to ask questions about water usage, energy efficiency, recycled building materials, and anything else that reduces their organization’s carbon footprint. 

professional-man-holding-bag-and-smartphone-walking-down-steps-of-commercial-building-with-aluminum-railings

Ultimately, prospective tenants are looking for commercial real estate that will uplift their image, for the sake of both employees and customers.

For all these reasons, it’s time to give your CRE some exterior upgrades. Even if you just renewed the five-year-lease for a quality tenant, exterior upgrades are sure to help keep them around.

After all, the best tenant turnaround time is none at all!

The Best Exterior Upgrades For Commercial Real Estate

We’ve put together a list ranging from basic exterior upgrades to the more luxurious architectural finishes. 

1. Updated Aluminum Railings: Affordable Exterior Upgrades For Beauty, Safety & Code Compliance

New aluminum railings should feature clean and classic lines that enhance any CRE. We suggest you select an American-made aluminum railing extruded from 6063 aluminum alloy, as they never rust. 

  • Black aluminum railings will provide a subdued, professional appeal in any commercial setting.
  • Or, choose lighter neutral tones for an uplifting, outdoorsy appeal.

2. Non-Wood Columns: Stately Style With a Limited Carbon Footprint That Appeals to Tenants, Their Employees & Customers

Solid wood columns are a beautiful way to uplift your building’s appearance instantly. Your tenant and their customers will appreciate the notion of luxury and quality. This translates to improved branding and enjoyable customer experience. (The things that matter to your tenant.)

But green-minded organizations might be concerned that wood columns increase your property’s carbon footprint. After all, it isn’t just the use of wood to create the columns, it’s the ongoing treatments and paint that could potentially affect a consumer’s opinion.

From a landlord’s perspective, the continual investment — both funds and maintenance man-hours — to keep wood columns looking their best isn’t appealing either. That’s why the staff at Speed would suggest you look into wood alternatives. 

Wood and Stone Alternatives — Columns for Commercial Property

Columns are a gorgeous way to instantly uplift your CRE’s curb appeal. You already know that better curb appeal equals a better class of tenant and higher rents.

The Benefits of Architectural Fiberglass Columns 

Fiberglass columns are an outstanding one-time investment for Jackson-area commercial property owners because they are:

  • Lightweight
  • Water resistant
  • Rot resistant
  • And they require no special maintenance

Architectural FRP Fiberglass Columns

For larger commercial applications, FRP fiberglass is used for load-bearing exterior columns that are 16″ or greater in diameter. They are also rot and water-resistant, and require no extra investment in maintenance. They might seem expensive now, but FRP fiberglass columns will last a lifetime.

Polymer Stone Columns

Polymer stone columns have the look and feel of real cast stone, but they weigh about 50% less than standard stone columns. 

We know the choices in architectural columns can be overwhelming. Check out this column builder tool to explore your design ideas. 

3. Pergolas Create Usable Outdoor Space for Offices, Restaurants, and Retail Settings 

We’ve already touched on the importance of a quality work environment within your CRE. Your tenant needs to hire and retain employees. Know that your best prospective tenants take work environments very seriously. In the wake of COVID-19, more people will be attracted to outdoor workspaces.

  • The CDC says Coronavirus spreads much more slowly outdoors
  • Employers will be eager to use outdoor workspaces as a perk to poach top talent

So, the next hot trend in CRE design is workable outdoor office space. Across the nation, architects and organizations are already seeking ways to encourage employees to work productively outdoors. Exterior upgrades in the form of open-air spaces at your CRE are the next evolution your commercial real estate should undergo!

We think Amanda Bahn and Dawn Reinard of Workspace Interiors / Office Depot say it best: “Aside from providing a breath of fresh air to traditional corporate settings, the concept of working outside also ‘works’ from a wellness perspective… outdoor workspaces literally bring the office outside.”

So bring the office outdoors to attract quality tenants next year.

In closing, the CRE market in Jackson, MS is experiencing the calm before the storm. When it comes to COVID-19, know that this, too, shall pass. And once we’re on the other side of this experience, the market will be bursting with fresh new entrepreneurs who need top-notch CRE. 

Industrial Property Leases 101

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Industrial property leases are different from residential leases. Today, we’ll cover different types of commercial / industrial property leases you might find here in Jackson, MS. We’ll try to touch on everything you should know before getting involved in an industrial property lease.

This article is geared towards inexperienced lessors / lessees. If you’re a young entrepreneur expanding out of your garage, or a future CRE mogul looking to build a commercial property empire in Jackson, you’re in the perfect place! If you’re an expert in property management already, visit our other blogs for more advanced topics. 

Let’s get started with a few basic definitions. 

Language Used in Industrial Property Leases, For Newbies

You’ll need to be familiar with these terms as you move forward with a commercial property lease.

The lessor is the owner of the commercial property. The lessor can be a human or an organization. Any specific responsibilities they have will be in the contract, so read it thoroughly. These could include issues like:

  • Security
  • Property taxes
  • Cleaning services
  • Landscaping / gardening
  • Certain utility bills
  • Building upgrades
industrial-real-estate-property-with-large-glass-walls-on-green-lawn-with-blank-white-sign

The lessee is the person (or business) who is leasing the property. In addition to paying the rent on time, the lessee might be responsible for:

  • Property taxes
  • Utility bills, wholly or partially
  • Property insurance or business insurance

The agreement between the property owner and the lessee is a contract, and it is legally binding. For instance, if your commercial property lease spells out that you’re responsible for the property taxes, and you neglect to pay them, you can be sued by the property owner.

Elements of an Industrial Lease Contract

Since industrial property is used differently than a home, commercial leases have more components, and contracts are specific to each tenant. There is no required format for the contract, but most cover these elements:

  • Leases can be short-term or long-term. They can last for 30 days or two years. Regardless of the length of the lease, it will have specific beginning and end dates.
  • An industrial property lease will specify the cost of rent, usually monthly. Remember, some landlords include property insurance and taxes in the rent, others don’t.
  • The lease should designate which party is responsible for repairs.
  • It should clarify who is responsible for paying for building maintenance.
  • The lease will usually include specific language about subleasing or conditions of default that can protect your business. Subleasing / subletting is the act of renting out a portion of the property to a third party — like renting one room of the industrial space to your brother-in-law for profit. This may or may not be allowed. 

Most leases include a section that discusses your options for renewing the lease after a certain length of time. Your future renewal terms are usually somewhat negotiable with the lessor, especially if you’re a quality tenant who pays the rent on time. But they are an essential guideline for your long term business plans.

Now, let’s get into industrial lease contract types. 

Types of Industrial Property Leases

Again, commercial property leases may work differently than a typical residential lease. As an entrepreneur, you should understand different types of industrial property leases. This will make your discussions with the property owner more comfortable and help you decide which type of lease will work best for your business.

Per Indeed.com, common lease types are:

  • Full-service: the tenant is only responsible for the rent. The landlord covers all other costs associated with the property. This is the most common type of industrial lease. It provides the most protection to tenants. (We’ll talk more on that in a moment.)
  • Single net lease: the tenant pays for rent and property taxes.
  • Double net: the tenant pays for rent, property taxes, and property insurance. 
  • Triple net: the tenant is responsible for rent, insurance, taxes, and property maintenance costs.
  • Percentage: the tenant pays a pre-determined base rent, plus a portion of their overall sales. Percentage leases are more common in retail spaces, but they’re not unheard of in the manufacturing sector.

If this is your first time leasing industrial space, you’ll probably be most comfortable with a full-service contract. This leaves you with a single rent payment and no concerns about the landscaping, roof repairs, property insurance or taxes. 

However, full-service leases do come at a cost! If money is tight (when is it not?) you might find a more affordable option with a single, double, or triple net contract. An overwhelmed landlord might be eager to shrug the responsibilities of taxes and maintenance. Still, as commercial real estate pros, we’d suggest you move forward very carefully with these types of contracts. Building maintenance and repairs can get costly — and savvy lessors know it.

It’s important to look at several industrial spaces in a neighborhood before making your choice. Even if you don’t know the contracts’ specifics at each property, you’ll get a good idea of the price per square foot and amenities available.

Then, it’s time to get down to the brass tacks of negotiation.

Negotiating the Lease

You don’t need to accept the first contract a landlord offers. Here are a few tips for negotiating industrial property leases:

  • Read the entire contract, ask questions, and sleep on it before you sign.
  • Landlords can hide fees in complicated “legalese.” Get a lawyer or CRE professional involved.
  • If a landlord is firm on rent price, you might be able to negotiate for extra benefits, like an allowance for renovations.

Finally, remember that you don’t need to be a lawyer to lease a great industrial space. 

Here at Speed Commercial Real Estate in Jackson, we know that most lessees aren’t attorneys. If you don’t speak fluent “legalese,” that’s okay! The staff at Speed is ready to help you understand industrial space leases and negotiate the best bang for your buck. Whether you’d prefer a massive, modern facility or a historic property, we’re ready to help you find the right Jackson area industrial space. So let’s talk!

Related Reading & Resources:

Indeed.com: An Entrepreneurs’ Guide to Leases for Commercial Property

NeighborhoodScout.com Jackson, MS Appreciation and Housing Market Data

What Affects the Value of Commercial Real Estate Properties?

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The commercial real estate market is continually evolving and reacting to changes that occur over time. If the goal is to purchase commercial property, you need to be aware of all factors that could cause an increase or fall in real estate values. The following are the most significant factors to consider before your next purchase to ensure you stay ahead of any value fluctuations. 

1.     Location

The location of a property is crucial and has a large impact on the value of commercial real estate properties. Location comes with varying elements to consider, the first of which is surrounding properties. If, for instance, your top pick rests in an area with other similar properties in terms of amenities and square footage, you are likely to get almost uniform increases or decreases in property values.

Take, for instance, the neighborhoods in the Downtown, Virden, and Belhaven areas of Jackson. Properties in these areas are often used for rental purposes. Occasionally, you’ll find that sizing in terms of square footage is similar. Their real estate values appreciate and fall based on the location, with the current rent being between $1,043 and $1,141 a month.

Commercial Real Estate and Accessibility

Transportation is another aspect to consider. This mainly involves access to highways and freeways, transit systems, and parking. Additionally, consider the number of vehicles that pass by daily. More traffic means more exposure for a commercial property and will increase real estate prices.

Vehicle ingress and egress is the last aspect affecting the location of real estate properties. Simply put, this refers to the ease of entry and exit. If a property has direct and easy access systems, it will likely come at a higher price than one which is difficult to access. The ability of vehicles to make turns also comes in handy. This results in more value for a property with easy maneuverability.

2.     Supply and Demand

Real estate is also subject to the laws of supply and demand, which state that if supply exceeds demand, commercial property prices will fall. In this situation, a buyer’s market arises where buyers have the upper hand. The vice versa refers to a seller’s market, when demand exceeds supply and property value increases.

3.     Demographics

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Demographics comprise aspects such as age, race, gender, population migration, and education levels. By relying on these attributes, the real estate market determines what properties to avail to buyers. Where regions experience an increase of young and educated people, properties are likely to be high-end. On the other hand, if the larger part of the population is aging, the types of homes in such an area will include retirement homes, resulting in low-priced commercial real estate properties. 

If you consider an area like Jackson, the median age of its population is 32.4 years. Furthermore, 85.6% of the residents here have a high school degree. With such factors, the value for commercial real estate properties in the area is bound to be higher.

4.     Maintenance

Property impressions are short-lived but play a significant role in determining commercial real estate property value. Attractive aesthetic touches such as finishes and landscaping details mean an increase in property pricing and value. It follows that poor exteriors result in low real estate property valuation.

The property’s interior condition also contributes to its value and indicates a lot about its maintenance. If, for instance, you are eyeing a newly constructed building, the chances are that it will need little to no repairs. This means the value of such a real estate property will be high. However, the same cannot be said of older buildings. Degradation of amenities such as the HVAC, piping, electrical wiring, and the foundation means more repairs for buyers and investors. Due to these factors, such a property features low desirability, leading to reduced property prices. 

5.     Renovation and Value Addition

Additionally, the potential to either renovate or add value is another factor with a major influence on the valuation of a commercial property. A property with such potential is a better option for investors and buyers, as it can fetch more money than its initial selling price. It will, therefore, come at a higher rate than a property where you can’t make any improvements.

6.     The Functionality of the Commercial Real Estate Property

The functionality of a commercial property mainly considers its size and the facilities provided. If more buyers are looking for a space with two bedrooms, a swimming pool and gym facilities, properties with these amenities will likely experience a rise in value. Those lacking these functionalities will, on the other hand, experience a drop in demand and subsequently, a dip in value.

7.     Commercial Real Estate Redevelopment Potential

With redevelopment potential, investors get the benefit of transforming a property into their desired space. Warehouse spaces can, for instance, be converted to business centers by investors and buyers looking to settle can modify the same piece of property into a residential space. Such flexibility results in an increase in real estate value since the possibilities are endless for buyers.

8.     The Economy

Economic performance in real estate also relies on aspects such as GDP, unemployment rates, household savings, and job growth. When these elements rise or fall, the regional, national, and international economy is also affected, contributing to a ripple effect in the real estate sector. If, for instance, there is an increase in jobs, people have more money to spend, which increases the value of properties. For example, Jackson’s economy has seen a growing GDP of nearly $25.5 billion, making it a hotspot for business. With this comes an increase in spending power. Increases in commercial real estate value also result, seeing as more people can afford property.

Consider Commercial Real Estate

Commercial real estate properties are an investment for people looking to either rent out or settle down. However, the factors listed above necessitate due diligence and patience before your purchase. While one factor may play a large role in your desired property’s value, it is wise to look at other elements to ensure you get a fair price. If you are looking to consult on investing in commercial real estate, get in touch with Speed Commercial Real Estate today.

What Dictates Commercial Rent Prices?

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Realizing a return on investment (ROI) is a priority for every entrepreneur, and the same applies to those who invest in commercial real estate. If you want to invest effectively, you need to understand the current commercial rent prices and the future worth of commercial properties. This applies whether you are considering an office building, warehouse, multifamily property, commercial shopping center, retail space, or any other type of commercial property.

Such insight will help you maximize your returns by opting for the right property. The factors that affect commercial rent prices lie in three major categories, namely:

  • Economic Factors.
  • Location Factors.
  • Property Factors.

Each of the aspects above has a significant impact on the prices of commercial buildings. Here is a breakdown of every category.

Economic Factors in Commercial Rent Prices

a) Interest Rates

Without a doubt, interest rates are the most significant driver of commercial rent prices. This is because those who invest in real estate use leverage or other people’s money to buy property. Interest rates here refers to the cost of credit. As such, when interest rates fall, credit becomes cheaper. Then, more funds flow into capital improvements and commercial real estate since the yields are higher due to rising property values.

On the other hand, high interest rates lower property values as a result of declining yields from the high cost of financing. In such situations, fewer people are willing to invest in commercial buildings. This causes the demand for the same to fall and, subsequently, the prices.

b) Wage Growth

The most recent and highest annual growth rate in three years is the wage growth of 2.3% by the end of 2018. Growing wages allow individuals/families to have more disposable income, which can encourage them to invest in commercial property. Wages are critical indicators of how cheap or expensive commercial property is at any given point.

Location Factors in Commercial Rent Prices

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a) Transport

The quality of transport systems has a direct impact on the valuation of commercial property. That means that acquiring commercial property in an area with a sufficient supply of transportation networks will attract higher yields. Also, in most cases, commercial buildings within a transport hub are in high demand. Potential investors are focusing on capitalizing on the increased foot traffic in such areas. That, in turn, causes the prices of commercial properties in such locations to surge upwards.

Improving accessibility to commercial property centers is possible through the development of transport networks. That is why the prices of existing and new commercial buildings rise follows the improvement of roads serving such properties.

b) Population Growth

Education levels, births, age distribution, and migration are some of the factors that contribute to population growth in a specific region. For example, the demand for high-end restaurants and retail may be high in an area that is experiencing an increase in the number of high-tech jobs.

On the other hand, there will most likely be a surge in demand for assisted living and retirement facilities within a submarket with an aging population.

Property Factors in Commercial Rent Prices

a) Location

Talking about commercial real estate prices without mentioning the location factor is next to impossible. The reason for this is that different locations impact the desirability of commercial buildings. This, in turn, affect the prices of such property. Some of the critical considerations, in this case, include zoning for your nature of business and the location’s accessibility for your target customers as well as potential workers.

A characteristic example, in this case, is a traditional retail property sitting in an area with multiple apartments and where there are few restaurants to serve the residents. Hotel operators will be competing for that commercial space, which will increase the price of the latter.

b) Potential for Development

The possibility of developing a particular commercial building further can push its price upwards as well. That is because the highest-and-best-use for such property in the future may be different from the initial design. For instance, the demand for multifamily residential property is growing in many real estate markets.

As a result, you are likely to see the redevelopment of obsolete shopping centers into higher density residential housing and the conversion of warehouses into live-work spaces.

Other Factors in Commercial Rent Prices

a) Credit Scores/Financing/Rates

Low-interest rates do not suggest that every borrower can access the same when buying or leasing commercial property. The creditworthiness and credit history of an individual or business are worth considering in such situations. If your credit ratings are low, you will most likely pay higher interest rates, which means that you’ll end up paying more in the long-term.

That ultimately makes purchasing commercial property more expensive.

b) Sale Or Leasing Method

The way someone chooses to sell or lease their commercial property will affect the overall price of such property. Additionally, the time and effort it takes to promote a specific commercial property will impact its price. Some of the approaches used to sell or lease properties include trades, auctions, leaseback, or exchanges – each of which come with their own unique costs.

c) The Urgency to Sell Or Rent Property

The speed with which a property owner wants to sell an asset or find a tenant will dictate commercial rent prices, too. For example, if a property is taking too long to offload, its owner can decide to take a lower offer to speed up the sale. If there is no urgency to sell or lease a particular commercial building, one may opt to hold out and wait until they find a match for their valuation.

If you’re interested in renting a commercial property for your needs, reach out to us. We’re happy to help you find what you need.

 

6 Questions To Ask When Choosing An Office Space

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Choosing the right office location and space can make a huge difference in the day-to-day operations of your business. You want your employees and any visiting business partners or clients to feel comfortable, welcomed, and productive in a space that is accessible. But do you know how to make the right decision about what office space is best? Read on to learn about what factors you should consider when choosing a location for your office. 

Does It Match Your Culture?

Both the space itself and the city or town it’s located in should match your business’s brand. Having a strong presence in a big city like New York isn’t right for every business, and getting such a prime piece of real estate can be difficult. Instead, find a town, neighborhood, or metropolitan area that appeals to both the clients and potential employees you’re trying to attract.

Don’t forget to consider your business’s values and culture when choosing the right space. Is your management style more laid back or more formal? Do you rely on teamwork and collaboration, or more on individual contributions? All of these will have an impact on where you choose to locate. Laid-back businesses may want to choose open-concept spaces in hip neighborhoods, while a more formal company may want a traditional cubicle-style office location in a city’s business district. 

Is It Easy And Convenient To Get To?

The perfect office space isn’t of much value if it’s in the middle of nowhere. Look for an office location that is accessible by public transit or near major highways so that employees have a stress-free commute and any clients visiting you on-site will be able to find you easily. Having a dedicated parking lot or plenty of parking nearby would also be to your advantage. And it even helps to be located in a highly walkable area, as this can increase your business’s visibility.

And don’t forget about nearby amenities. It can be nice to take clients out to lunch at a restaurant right down the street, and employees love having cafés and shops nearby, so they can get out and take a break from the office. If employees feel like they’re trapped in the office because it’s surrounded by busy roads or it isn’t close to anything, employee satisfaction may be lower. 

How Is The Office Space Laid Out?

Take into consideration how the space is laid out and if it works with how your business operates. Are there individual offices for senior management? If you focus on collaboration a lot, are there large conference areas? Do you plan on adding cubicles, or do you want to keep the space totally open? If you plan on meeting with clients in your office, is there space for that, too? You want a space that encourages productivity while discouraging burnout or isolation. 

High angle shot of businesspeople in an office with staircase and cafe tables

It’s also important to think about amenities like restrooms and break areas. Are there plenty available and are they in an area that’s accessible to your employees? It can be annoying to have to take a five-minute walk to the other side of the building just to use the restroom. And you’ll probably want a designated break or lunchroom, complete with space for, at the very least, a refrigerator, coffee maker, and microwave. Having an area for dining or just relaxing can encourage strong relationships between employees. 

And don’t forget about outdoor space as well. A park-like setting is always attractive, as this allows employees a chance to go out and get a breath of fresh air or some exercise in at lunchtime. But in big cities, having outdoor space, or even a dedicated parking lot is difficult. However, there will still be plenty of places nearby to walk to. 

Is The Space Right For Your Image?

You’re working hard to grow your business, attract new clients, and build a solid reputation, and your office space should reflect the image you’re trying to project. Think of your office as a marketing tool. Do you have a welcoming reception space that matches the feel of your business? An industrial-looking space could be great for a tech startup, while the same space may be a turn-off for clients of a financial consulting firm. 

What do you want your office to say about you? Are you fun to work with and work for? Then look for a relaxed space, where you can include elements like a ping-pong table or a recreational area. But at the same time, an ostentatious or over-the-top office space may have employees and clients wondering if you’re focused more on shallow elements as opposed to your actual operations. 

Is There Room To Grow?

Think about the projected growth of your business before you decide on the right space. Even if you’re small right now, where do you think you’ll be in five or ten years? Of course, you’re undoubtedly hoping to grow, but think about it in realistic terms. You don’t want to be moving office locations every few years to adjust for growth, so look for an office space that can scale with you.

Even if you’re not using all the space right away, it may be good to have down the line. Most experts recommend having at least 80 to 120 square feet per employee, including both personal workspaces and common areas. If you only have twenty employees now but plan on hiring five to ten more within the next few years, you’ll need an extra 400 to 1200 square feet to accommodate them. 

Are You Getting A Great Value?

Think about what element of your office location is most important to you. Is it being conveniently located close to public transit, or is it all about having a presence in the right neighborhood? Whatever is most important to you, make sure you consider this factor, along with the price of the space you want. Does it seem worth it? Remember, your office space is one of your biggest investments, and having an office that increases productivity, bolsters employee retention and satisfaction, and brings in new clients will pay for itself in the long run. 

3 Reasons To Invest In Commercial Real Estate

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While the stock market appears to have the glamour and action, with prices rising and falling by the hour, it’s really quality real estate investments which have the power to perform during any market condition, bull or bear. People further argue that stocks and bonds have the edge over real estate investments, thanks to their liquidity, but that theory of liquidity simply doesn’t hold water, if you don’t mind the pun.

Granted, liquidity can be of value for those investors uncertain about their decisions. Liquidity is your escape hatch when an investment sours or no longer meets your financial needs and goals. Unfortunately, all too often, by the time you are opening that escape hatch, the bad news has hit the streets which is reflected by a plummeting price. Then the game becomes about getting out before others.

This is not at all the game which commercial real estate investors prefer playing. They are more into winning from step one, and continuing to cash in on their astute choices month in and month out, thanks to the reliable rental and lease revenues which commercial real estate is capable of generating.

The Three Reasons You Need Commercial Real Estate

While every investment offers certain benefits, when you compare the reasons why astute and experienced investors regularly seek out commercial real estate properties as investments, you will better understand the logic behind making this type of commitment. And you will likely find yourself more excited and motivated to pursue commercial real estate because, as you will see, those benefits really pay off!

Reason #1: Tax Advantages

Whenever you earn dividends on stocks or interest on bonds, you are required to declare those earning on your tax return and pay taxes on them, according to your tax bracket. With tax brackets as high as 37%, you could see a good third of your investment income from stocks and bonds go right into the pockets of your local and federal government.

With average stock yields offering an unexciting 2.22% annual return and bond yields  of 5% per year, knocking off a third of those returns brings you down to returns of 1.40% and 3.15% after taxes, but before inflation. With US inflation on pace to run 2% per year for the next few years, your stock returns don’t even keep up and the bonds are barely staying ahead of the inflationary curve. (By the way, the reason bonds offer higher yields is that there is minimal or no upside growth potential on the bond principal; annual interest payments are what bondholders rely upon.)

In comparison, when investing in quality commercial real estate investments, you can shelter most, sometimes all, of your real estate revenue. In fact, in the early years, if played right, you can save taxes and get a tax-free income stream with a paper loss on your commercial real estate investment; that is simply something a stock or bond cannot do!

Reason #2: Reliable Revenue

When you buy stock, you are buying shares of a company which works to generate profits for its shareholders. Unfortunately, those profits are beyond your control; if the CEO of the company whose share you own is awarded a hefty “performance” bonus, that comes out of your pocket in the form of reduced dividend payments. Ironically, that same CEO, when the company doesn’t produce profits or dividends, is still paid a sizable salary and often still gets a bonus!

If you view a commercial real estate venture as a type of business, which has employees and generates revenue, the powerhouse making your money is not a highly-paid executive or group of employees, but instead is a tangible property. Better than bonds, where interest rates are fixed for long terms of time, real estate rental agreements and leases are typically structured as short term contracts, which regularly renew with increases in rental or lease payments. Even long term commercial property leases often factor in regular lease increases to reflect anticipated inflationary increases.

So not only are you sitting on a reliable revenue stream, but it adjusts for inflation, often notching up faster and higher than the actual cost of living is rising.

Reason #3: Superior Growth

While stock prices can fluctuate wildly, particularly during economic periods of uncertainty, commercial real estate investors are blessed by a quieter, less volatile, marketplace. As a matter of fact, stock prices rarely reflect the actual value of the company, but infers value based upon potential, promises, and hopes. In other words, the stock market is often pushed about by emotions, which causes dramatic rises and falls of fortunes beyond the control of the investor. 

It’s just the reverse when it comes to commercial real estate investments. Because there are not daily postings of the “value” of a commercial real estate investment (which reflects more than the intrinsic values of the property), determining a realistic and fair value of a property is based upon formulas, not feelings.

Two formulas in particular remain popular and reliable methods for gauging the value of a commercial property:

Capitalization Rate

Also called a “cap rate,” this determines actual investment return (as a yield percentage) by dividing the net annual income by the original purchase price. For instance, a property for which you paid $1,000,000 and is generating a net income of $75,000 per year would have a 7.5% cap rate (75,000 divided by 1,000,000 = 0.075, or 7.5%).

If you held that property for 20 years and your net income rose to $150,000 per year, your cap rate (or investment return) is now 15%. However, if you decide to sell this property at that original 7.5% cap rate, your property would list for $2,000,000, or a doubling of your investment.

Gross Rent Multiplier

Also called a “GRM,” this is a more simplistic approach to determining value, as it is based solely on gross rental revenues, without factoring in operating expenses to determine net revenue. For the astute investor confident about effectively managing commercial real estate operating expenses, purchasing on a GRM evaluation is an acceptable approach.

The formula for determining the GRM is simple: divide the asking (or purchase) price by the gross rental revenue, and the result is the GRM. If we use the same example as above, where you paid $1,000,000 for a commercial property, here is how you would calculate its GRM for that purchase price:

  1. We will assume that gross rental revenues run $150,000 (operating expenses of $75,000 produced the $75,000 net income in the Cap Rate example above)
  2. Since you paid $1,000,000 for this property, divide $1,000,000 by $150,000
  3. The result is 6.67, which is the GRM if purchased at $1,000,000

By the way, if you are a savvy investor and can negotiate a $900,000 purchase price, your GRM drops to an even 6.

The rule to remember is you want to purchase properties with the highest cap rate and/or lowest GRM.

Finally, as to future value. It is great to say your property is worth $2,000,000 on paper, but it’s unlikely you will find another solid investment capable of producing the 15% return you are now earning. While investors in stocks and bonds are usually trying to watch for a good selling point, with the phenomenal rate of return you receive, you have no motivation whatsoever to sell and get into “something better.” You already have the best investment with commercial real estate in your portfolio!

Commercial Real Estate Opportunities in Jackson, Mississippi

Savvy investors in America and around the world find the commercial real estate opportunities in Jackson, Mississippi both exciting and profitable. This state capital, with a population of under 200,000 citizens, offers beautiful commercial properties with exceptional cap rates, much higher than the national average.

At Speed Commercial Real Estate, Jackson is our own very backyard which we have worked assiduously and thoroughly for more than a decade and a half. As specialists in commercial property sales, we are also active managers of multiple properties, including office, retail, and industrial warehouse spaces.

For the discriminating investor demanding an above-average return with below-average risks in the commercial real estate sector, our expansive list of properties can very well meet your specific desires. Call us today and we’ll help you uncover a property gem capable of amazing income and growth returns.

6 Questions to Ask Before Leasing a Commercial Property

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Maybe you are moving your business out of your home office. Maybe the office space you have been using for years no longer meets the needs of your company. When you’re considering leasing a commercial property for your Jackson business, it is important that you know what questions to ask a real estate agency or landlord so that you can make an informed decision. If you don’t ask the right questions, you may find yourself in an arrangement that is not right for your company.

Preparation for Leasing a Commercial Property

The search for a new commercial space is an overwhelming prospect. Fortunately, taking the right precautions ensures that you find a facility that meets the needs of your business. However, if you are new to leasing a commercial property, or you have not done so in a very long time, you may not be sure what questions you should be asking. We put together a quick look at the most important questions that you should ask before leasing a commercial property in Jackson, Mississippi.  

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Under What Circumstances Can the Lease Be Terminated?

One of the most important leasing questions is what the exact terms of the lease are. While most commercial leases are for one year, an initial two- or three-year lease is not uncommon. It is important that you not only find out how long the lease is for, but that you also ask under what circumstances the lease is terminated. For instance, if your business’s circumstances change, or another major tenant in the building leaves and causes your business to drop, is there a way for you to exit your lease early? Try to negotiate a break clause into your lease that allows termination of your lease early. This protects you against the unexpected. Watch out for a landlord who is unwilling to negotiate the terms of the lease with you. Sometimes, this is a sign of an unfavorable landlord who will be difficult to work with when things go wrong.     

Is There a Possibility to Expand?

When you initially move your business into a commercial facility, it’s tricky to gauge how much space you actually need. This can cause a variety of problems. Say you choose too small of a space; you have no room for growth. But, say you rent too large of a space; you’re left with rent payments you struggle to afford. It’s important that you ask potential landlords about possibly expanding your business in the future if necessary. For instance, is there a neighboring space that you could expand into? Is it easy to move into a larger space, should one open up? Having the possibility to expand would allow you to lease a conservative space now while your business continues to grow. 

Who is Responsible for the Commercial Property’s Insurance?

In the rush and excitement to secure a space for your business, don’t forget to talk about insurance. It is important that you discuss insurance coverage and requirements. This ensures that your business is covered in the event of an emergency. Generally, landlords carry a comprehensive policy that covers liability for common areas such as lobbies, stairways, and elevators, and that provides casualty protection for the building itself. It is important that you find out from a potential landlord what areas of the building you are responsible for. At the very least, you likely must carry liability coverage that protects the landlord against any claims that arise from your business’s operations (for example, if a customer gets injured in your office). Make sure that you read through the landlord’s policy in full. Consult an insurance specialist and find out what additional policies they recommend you carry for your business. 

Who Else Can Lease this Property?

Of course, another piece of important information when leasing a commercial property is who the other tenants are in the building. Knowing who your neighbors are is critical. You may not want to move into a building if there is a competing business, or if a neighboring business attracts an unsavory crowd that could deter customers. It is then important that you also ask what future businesses are allowed to move in. Additionally, you should ask to negotiate limits on what type of companies move in next to you in the future. You may even be able to secure a non-compete clause as part of your lease that would ensure that no similar business can open in the business or center. 

Is the Space Modifiable?

It is also important that you ask if the space is modifiable, and if so, to what extent. The fact is that it is not usually possible to find a commercial facility that meets the exact needs of your business. You may need to do some renovations to make the space work. It is important that you ask the landlord about acceptable modifications. If no, or only minor, modifications are acceptable, then the space may not work for your company. Therefore, it is important that you find out what the rules are before you sign the lease. 

Can I Sublease if Necessary? 

Before signing a long-term lease for a commercial facility, it is also important that you find out what restrictions surround subleasing. The reality is that you may sign a 5-year lease only to discover that the space you rented is too large or too small for your business’s changing needs. If you cannot get out of your lease right away, your only option may be to sublet to another business. Before signing your lease, however, find out if subleasing is allowed. Furthermore, ask about restrictions on what kinds of businesses you can sublet to. 

Knowing what to ask a real estate agent or landlord before you begin looking at rental properties for your business can help you to make the right decision that will fit the needs of your company. Contact us to learn more about what you should ask before signing the lease on a commercial property.