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Commercial Real Estate Occupants – 10 mistakes you may be making

Decision making

1.) Buying when you should lease

Among the many considerations, you should examine are the time in the market cycle; the amenities of the building; if you expect to outgrow your location within three to five years; and if you are a publicly-traded company. Consider leasing if your business is outstripping its building capacity almost daily; if you want to build the business and sell it; and if you are sinking every bit of operating capital into business growth.

2.) Leasing when you should own

You should own if you have been in business for over five years; your space needs are diminished; the interest rates are historically low; you have enough idle cash for a down payment, and the cost to own versus the cost to lease is comparable.

3.) Leasing more space than you need

If that growth spurt you expected never occurred, you wind up with more space than you need. That means your profit dollars are consumed in that space.

4.) Committing to a short-term lease when the market is down

If your business is suffering and you are questioning whether or not it will survive, you may think you cannot commit to a lease term that’s more than a few years, even though the deal is remarkable. Think again. A solution could be a short-term lease with a fixed rate option to renew. In an upmarket, owners will most likely not agree to such an arrangement, but in a down market, they may negotiate to secure your tenancy. You can also consider negotiating an out clause.

5.) Committing to a long-term lease when the market is up

If the market is up, why commit to a long-term lease? You will pay substantially over market lease rate for the space.

6.) Waiting too long to consider your alternatives

Change is inevitable and you can miss out on great opportunities if you procrastinate. If you want to move and there is some complexity to the operation, plan on expediting your decision to make it happen in your favor.

7.) Thinking you will not need representation at renewal time

You owe it to yourself and your company to have representation during your lease renewal. A broker is well informed on market conditions, current lease rates, and terms and the most recent comparable lease transactions.

8.) Not weighing all your options

Carefully examine whether you stay in your existing location, move, or change the operation to outsource a function.

9.) Not all brokers are created equal

If you have three service providers offering the same service, what suffers is the service you receive. Because you have not loyally chosen a representative, the representative has no loyalty to you, so you will see only the most likely alternatives for your requirements.

10.) Not competitively bidding your financing

You owe it to yourself and your company to get several opinions before you allow your bank to do your loan. Unlike commercial real estate service providers, lenders sell money at a price … the interest rate. Financing can vary greatly, and you want to ensure it is in your favor.


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