Four Points to Consider When Searching for Commercial Space

Rent or mortgage payments are among the top expense line items in operating your business—right up there with staffing costs. Your choice of location and space layout can potentially impact the productivity of your team, as well as your customers' and partners' perception of your brand. With that in mind, let's explore some key considerations that come into play when choosing a business location.

Own or Lease?

The buy versus lease scenario involves significant analysis, and is a decision that may change over the life cycle of your business. Numerous factors should be taken into consideration when choosing between buying and leasing your space or building. These include capital availability and demands; flexibility and mobility to accommodate business growth; tax implications; risk tolerance; the abundance or lack of available space; and aptitude or interest in managing and maintaining your own property.

Location, Location, Location

Your choice of business site should be a strategic one. Do you locate close to the decision makers' homes, your employee base to reduce commute times, or to your customers? The answer to this question is driven by multiple variables, including business size and type. Appropriate zoning and adequate parking are factors to consider early in your process. Let's look at examples across an array of small business types:

• Financial services: Choosing a location in a key financial corridor, such as downtown, may make the most sense, particularly when interacting with other businesses, or for the high-profile environment a class “A" building may project. Smaller service firms with high public interface may prefer locating on a suburban arterial with prominent signage, closer to their customer base.
• Medical clinic: While numerous practices and specialties have close relationships with hospitals and strategically locate on or near an inpatient campus, many medical clinics are dispersing into residential areas to be closer to patients' homes.
• Restaurant: Visibility is often important to food establishments causing them to choose a high-traffic corridor, or a destination location near eateries to create synergy. Restaurants and retailers are typically more dependent on their neighboring businesses to generate cross-traffic.
• Logistics company: A wholesale business or distributor may prize proximity to transportation corridors, minimizing the time and cost of moving goods. For some, this could mean locating close to the airport. For others, being close to highways is key and may be driven by access transit corridors, airports, inland ports, and other byways for distribution.
• Sole proprietor: If you're working independently, your choices may be more open. After weighing the pros and cons of working from home, you may consider executive suites that offer support services, coworking spaces for shared input from other entrepreneurs, or a more traditional private office or shop.

Pay Attention to the Details

Whether the space is for lease or for sale, who pays for what? Will buyer or seller pay for an environmental assessment or the survey in a purchase? Which party maintains, repairs, and replaces the air-conditioning systems in a lease? Do you know the difference between a gross lease, a modified gross lease, and a net or triple net lease? Or how a base year lease is administered? If you just renew an old lease without asking some of these questions, you could be putting yourself at risk of higher expenses, or possibly paying higher than market. And does it always make sense to negotiate the shortest lease term possible? While it gives you more flexibility, there may be market reasons to extend for a longer term.

Commercial Real Estate Subspecialists

Having your business needs protected only makes sense. A buyer/tenant's agent is traditionally paid out of the seller/landlord's commission to their own representative, similar to when you buy a home, so there is no financial incentive to do it alone. Experienced leasing agents specialize in particular sectors (such as office, retail, or industrial), and track market data which helps ensure the economics of your transaction make sense. They're also familiar with the reputations of some landlords, know which properties are locally or professionally managed, and can help minimize interruptions to your operations.

About the Author: Barbi Reuter
Barbi Reuter is President of Cushman & Wakefield | PICOR, an employee-owned commercial real estate services provider based in Tuscon, Arizona. She was named Small Business Leader of the Year in 2017 and currently serves as Board Chair for the Tucson Metro Chamber, as a board member for Sun Corridor Inc., and YMCA of Southern Arizona, and is a Greater Tucson Leadership graduate.