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Home » Brokerage » Leasing » How to Lease Commercial Property Efficiently

Working with a tenant to get them into a newly leased space is a detailed process. Control is essential for a positive long term occupancy outcome.

The tenants leasing requirements, the factors of property design and functionality, and the landlord’s instructions all require balancing through the move-in procedure. Questions will arise and record-keeping will be important to the end result.

We have created this detailed article to give you a framework in which you can systemize and implement those professional leasing services. You can add your own leasing elements to this list given the property type and the priorities of your client.

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Gather These Leasing Facts

The matters detailed below can be expanded further subject to the type of property. Consider the types of properties that you are leasing today and those properties that are getting the majority of the enquiry.

Create a leasing checklist from these factors below given property and client considerations.

  1. Take the initial enquiry from the tenant. This will include the location of the property, the size of the property, the necessary services and amenities. You can also ask about the duration of occupancy, the structure of the tenants business, and details of the activities to be undertaken by the tenant on the property. It also pays to ask questions regards special needs of the staff on the property. That would be the way in which they would use the property. For example, accessible car parking, or special areas for the staff such as lunchrooms, showers, and tea rooms.
  2. Qualify the tenant financially. This will include the level of rental, any existing occupancy and the timing of a move to new premises. You can also explore details of any guarantees or guarantors which can be provided. Review any history of the previous occupancy. 
  3. Research history. Check the details of the previous occupancy in other leased premises to ensure the stability of the tenant in any new premises that you can locate.
  4. Determine space requirements. The space requirements will include the overall size of the premises to lease which can be further categorised into office space, warehouse space and retail space if appropriate. You will also need to know the dimensions of storage and turnaround space in the warehouse area. That is to accommodate deliveries and despatches on transport vehicles. 
  5. Car Parking Capability. Car parking is also an important part of occupancy today. Many tenants require convenient and accessible car parking for their staff. Ask other questions regard any special signage and security needs which must be incorporated into occupancy.
  6. Identify the potential properties to inspect. Most property inspections with a potential tenant should be limited to no more than four or five properties. If you inspect too many properties, the inspection and leasing decision process becomes more difficult for them. Shortlist the appropriate properties to inspect. It pays to have a portfolio of photographs of the relative premises in your office to discuss with potential tenants.

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Selecting the Best Property

  1. Inspect the chosen properties. In all cases, you must inspect properties with the tenant. This is the only way you can control the information provided to the tenant and the potential closure of a successful deal. Make sure that you understand the relative property that you are inspecting. Know how to move through the premises in a practical way which then shows the premises in its best light. Have detailed fact sheets available to provide the tenant with essential and relevant information.
  2. Work with the tenant’s space planner or architect to determine final suitability. When the ideal premises have been selected by the tenant, the momentum of the deal can be maintained..Try to get involved with the person responsible for designing the necessary fit-out. This process is productive and also helps you later when you need to explain to the landlord the final use of the premises and its design requirements.
  3. Identify with the tenant the works needed from the landlord as part of premises handover. In most new lease occupancy, the landlord will need to undertake certain works to the premises as part of the agreed lease deal. It is important that these works be fully documented in detail and agreed between the parties. Both parties will then know what is expected of them in the provision of the premises and the timeliness of doing so.
  4. Identify with the tenant the works to be considered as fitout works to be undertaken by the tenant, and seek plans and specifications for the landlord to consider and approve. As part of this discussion and consideration, you will need to decide with the landlord how the fit-out will be handled at the end of the occupancy. The landlord may require the tenant’s fit-out be removed. Any removal activity must be fully documented in the agreement to lease and in the final lease itself.  What is the process around this? Photograph the premises and document its condition before any tenant’s works commence. This removes any disagreement between the parties as to the condition of the property at initial hand over. After many years of occupancy in a lengthy lease, you need valid records to clearly display what will be done at the end of the occupancy.

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Creating Occupancy Documentation

  1. Structure a suitable rent and lease proposal for the tenant to sign. There are a number of rental structures and lease alternatives which can be considered in a lease proposal. It is not just the level of rental paid that is important. Consider things such as the commencement rent, the term of occupancy, the existence of any options for extended occupancy, the way in which the tenant will contribute towards outgoings, the rent review structures for the lease, the existence and provision of any rental incentives, and any special controls which must be applied to the tenant during the term of occupancy.
  2. Secure agreement with the landlord on a final lease. The final agreement to proceed with the lease is usually on an ‘Agreement to Lease’ document which fully outlines all the key lease clauses and terms of occupancy. When both parties have signed this document, the landlord’s solicitor can be instructed to complete the final lease for the signature of all parties. Know that the agreement to lease is not usually regarded as binding. Therefore access to the premises should not be provided to the tenant until such time as they have signed the final lease, and satisfied all lease agreement requirements of rental, deposit, and guarantees.
  3. Oversee the preparation of the agreed lease document with the landlord’s solicitor and its acceptance by all parties. This will include full signatures of all parties on the lease, collection of rent, the collection of deposits, collection or provision of guarantees, and approval of any fit-out plans. The one fatal mistake many agents make is leaving the lease document to the clients solicitor to prepare; inexperienced agents assume that the lease will be done in a timely manner. Best practice shows that you should maintain contact with the landlord’s solicitor to ensure that the lease document proceeds as planned.
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Preparing for Occupancy

  1. Get the landlord to commence handover works for the premises. The landlord should only commence works in the premises relating to the landlords part of the agreement, once the tenant has signed and satisfied all matters relating to the lease.
  2. Inspect the premises with the tenant to ensure that all matters of handover have been undertaken. It pays to keep some formal record (notes) and photographic record of the premises prior to handing over to the tenant. Given that most leases are lengthy terms of occupancy this practice will prevent any disagreement at the end of the lease.
  3. Provide the tenant with keys to the premises providing that all lease documents and money relating thereto has been paid. Providing keys to the tenant is only done after all documentary and monetary matters are satisfied with the acceptance of the landlord and the landlord’s solicitor. The keys should be signed for and a record of that kept on file.
  4. Get a fitout guide to the tenant for use and control of their builders in the fitout stage of occupancy commencement. Contractor insurance will be part of the fitout guide requirements. Terms of site access and controls of works on site will also be essential. Without that, the new tenant will likely disrupt other occupants in the building.
  5. Provide liaison between the tenant and the landlord during the phase of tenant fit-out construction. Best business practice here is to remain connected between the tenant and the landlord whilst the tenant is establishing their fit-out. This allows you to control any matters of disagreement on behalf of the landlord.
  6. Following satisfactory fit-out construction, inspect the premises the tenant and the landlord to ensure that all matters are as agreed and in accordance with the necessary lease plans and approvals for the fit-out as given by the landlord.
  7. Give the tenant a building manual to set the rules of occupancy and the channels of communication back to the property manager or landlord.

At this point, you have successfully transacted and controlled a new tenant lease and occupancy. 

If you follow the detailed processes above, the landlord will regard you as the agent of choice with future lease needs and with other properties. Remember who your client is and serve them well.

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