The Secrets Of Successful Commercial Renting

55% of the UK’s commercial property is rented rather than owned. For businesses that don’t yet have substantial funds in the bank, the ability to rent a space for a small upfront deposit and an affordable monthly fee can prove transformative. In fact, within the small business sphere, success simply wouldn’t be possible without the opportunity to rent. 

Unfortunately, just as the last few years have been punctuated by rising rates and unreasonable landlord demands in the private sector, commercial rental has become a fraught and challenging obstacle course. Hence why there are now countless empty rental units in the majority of towns and cities. Businesses simply can’t afford to keep up with what landlords often require. And many have failed while attempting to do so.

However, the fact that the majority of commercial spaces continue to fall under the rental umbrella is a testament to the fact that it is possible to rent successfully for your business. The question is, how do you make sure that you can stay afloat while renting commercially?

Always seek legal help

Seeking legal counsel is as important while negotiating a commercial lease as it would be if you were buying your own business premises. After all, a rental contract is a legal document and, if you don’t approach it with care and understanding, you could end up locked in a term agreement that leads to the end of your business. 

While there will be some initial outlay, which you should add to your overall moving costs, getting a qualified lawyer to check over any rental contract can help you notice issues such as unfair terms, potential risk factors, and expenses that you may end up getting stung with along the way. Equally, a lawyer will be able to help you spot potential opportunities, such as the chance to negotiate a lower fee, or the opportunity to extend your lease where you might not be able to otherwise. 

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Look for long leases

For the most part, signing a short-term, six-month lease for your business is a sure way to fail, at least from a monetary standpoint. After all, as soon as that initial lease is up, your landlord could easily send your rental rates soaring. Not to mention that, if you do end up having to find somewhere else because that’s happened, you’ll face the expense of moving fees, a new upfront deposit, and the need to put down a month in advance somewhere else. 

To avoid all of this, you must seek longer-term commercial leases, preferably as long as 1-3 years. This might sound like a lot, but it’s a pretty standard number in the commercial rental world. Some commercial leases even span as long as 25 years. While you will want to avoid that latter length of time for fear that things don’t work out, finding somewhere that allows you to stay at one rate for at least three years can buy you time to build your business, your profits, and your prospects overall.

Consider scalability

Speaking of looking to the future with your lease, you should also consider business scalability within your rental journey. After all, the whole point of leasing a commercial space is to grow your enterprise. But, if you sign up for a three-year contract in a tiny office, then the only place that your business can grow is into an off-site storage unit. While there’s nothing inherently wrong with that, it can be a difficult reality to work around if your business grows quickly and has to make do with a too-small office for a year or more.

Obviously, you can’t know how successful your business will be, nor do you want to jump right into a massive space that you struggle to fill. However, the manageable nature of monthly rental rates should afford you the option of somewhere slightly larger than you might need right now. By using your spare space for storage purposes until your team expands, you can then breathe a little more easily that you have what it takes to grow your business throughout your lease and to do so with ease. 

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Consider negotiating rental terms

In an ideal world, your commercial rental terms will be completely in line with what you need for your business. But, renting is rarely so straightforward, meaning that ensuring a setup which suits will also require some negotiation.  

As mentioned, the oversight of a lawyer can help in this regard, as they may spot potential issues in your lease that you otherwise wouldn’t notice. The term of any lease is always a popular option for negotiation, especially if a landlord requires a shorter or longer lease period than you had in mind. Equally, you might want to negotiate – 

• Break clauses: A tenant-only break right will allow you to end a lease early without repercussions, and is often beneficial for small businesses with uncertain prospects. Most often, a break right will be applied to something like the end of each year, or the last year of your lease. In either instance, this can be beneficial for saving you some money if you require it. Do, however, be wary of break clauses which also allow your landlord to turf you out without notice. 
• Rent-free periods: Rent-free periods are relatively common in the commercial rental world, and will often be applied at the start of a new lease to provide that business an opportunity to establish itself. Some landlords may be reluctant to include this incentive, but you should be able to negotiate some kind of rent-free term using provable metrics like your profit margins. 
• Repair obligations: All landlords have different repair obligations, and these will have a huge impact on what you pay for at the end of your lease, and also how much of your deposit you can expect back. Ideally, you should negotiate a lease which only accounts for unreasonable damages, rather than things like general wear and tear which could quickly get expensive in a busy commercial space. 

Know when it’s time to move

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Any move in business can be risky, but staying in a commercial lease that no longer suits can be far worse in the long term. There is perhaps one exception for this, which is for retail businesses that may come to rely on their spaces for custom. However, even in the retail sphere, there are some sure signs that you should leave a commercial lease at the first possible opportunity, and those include –

• Unreasonable monthly increases
• A space that’s too small
• A landlord who makes excessive demands
• Poor property maintenance
• Etc.

In these instances, it’s typically best for business that you find somewhere else. While moving can be an undeniably disruptive process, things like leaving a ‘new address’ notice at your old premises, or simply clearly marketing your move in all areas, should mean that you can take all business with you. Simply ensure that you start seeking a rental that’s better-suited to your business at least six months before your old lease ends. If you pay your rent quarterly, you may also need to give up to six months of notice and should do so to avoid unexpected fees or, potentially finding yourself trapped into a brand new contract. 

Takeaway

Renting is never a risk-free proposition but, when done well, it has undeniable benefits for your business prospects. Simply make sure that your lease is well-suited, fair, and in the best interests of your business by keeping these points in mind at all times.