When it comes to a commercial real estate agent assessing a commercial property for lease there are some key questions to ask and evaluate. The landlord should have most if not all of the property information that you need so it is up to you as the agent to get to the real facts of the property as it is today and how it will function when it comes to new tenants in occupancy.
When you completely understand the property you will be able to set about finding the targeted tenants that can afford the rent and take over the risk of occupation. The lease for the premises will tie it all up in a valuable document that underpins cash flow for the landlord.
It should be said that a good lease that is prepared by the landlord’s legal advisor is desirable in all leasing situations. Sometimes you will get landlords taking ‘shortcuts’ on a cheap and generic lease document. That is a poor choice that will usually come back to haunt them at time of property sale; the buyer for the property invariably looks at the leases for stability and income. A generic lease poses more questions than it answers. A generic lease offers little value to a property sale situation.
Here are some other questions and issues to be checked as part of a property leasing process:
- Check out the size of the floor plates in the building. Smaller floor plates are limiting on the size of the tenant that can take up a lease over the premises. Larger floor plates are more flexible and therefore are more suitable for the larger corporate tenants.
- The common areas in the building will be important from the aspect of customer and tenant access. In a building of multiple tenant occupancy potential look at how the common areas serve the tenants and the operation of the building on a daily basis. Look at the entrance ways and the lobby foyer to the property. How do they work and are they sufficient for the tenant mix?
- The lifts and stairwells in the property should be assessed for practicality and use. The assessment depends on just who tenants are in the building and what pressures they can apply to lifts and stairs.
- Services, amenities and building facilities are important to the tenants that may be in occupation or those that are considering taking up a lease. The washrooms will be important for both tenant use and customer use. Are they adequate for the volume of people and the daily demand? A special tenant such as a ‘call centre’ will place greater demand on washroom use, and that will have a flow through impact to building operational costs. If you take a tenant into the building that clearly has an extreme property use or places higher demand on common areas, that tenant should be made to pay a premium for building use. You can recover that extra cost through the rent or the outgoings for the tenancy.
- Security of leased premises today is perhaps of equal if not greater concern to a tenant as that of air conditioning or rent. The property has to offer the right levels of security and access. The tenants should have secure occupancy capability and convenience as part of paying rent to the landlord. The permitted use of the premises should be defined as part of the landlord providing premises.
- Electrical systems and internet access are of importance to most tenants as they establish and undertake their business on a daily basis. The threat of power outage may also be of concern given the potential of data loss in some locations. A modern and quality building will typically offer alternative power solutions and backup to the tenants in occupancy.
- Car parking convenience should be available to tenants and customers to the property. The demands on car parking in the building should be assessed as part of the initial tenant interview and property inspection.
- The management and cleaning of a property will be of relevance to many tenants. It is of note that a retail property or shopping centre will place greater demands on cleaning systems and costs.
You can add to this list based on the property, the location, and the parties to the lease transaction. It is easy to see how important the property facts are to a new lease negotiation.