When Is The Best Time to Start Looking for Commercial Spaces?
Location Location Location. Everyone has heard this is key to real estate, but just as important to an investor or a business owner can be timing. When to start looking, and when to make an offer can impact your ability to negotiate and get the most favorable terms for you.
This is especially true when looking to lease a new commercial location.
Unlike residential, commercial leases are much more complicated and cover many more variables. Also, unlike residential spaces, which are typically move in ready, commercial spaces very often need substantial tenant improvements prior to move in, and many times take substantially longer than a residential improvement.
Take for instance installing fiber optic to an office space for fast internet service. For a residential building, this is a simple event, placing the order and waiting for the installer to come by and turn the service on. In commercial, even if the building has fiber going to it, it doesn’t mean the space you are leasing does, and if you are in a high rise, you will need a separate vendor to pull the fiber cable up to your suite. This takes coordination, and can take an additional week or two.
This begs the question, when is the right time to start looking to lease a commercial space. Typically, we recommend our clients to start looking up to six months in advance of their anticipated need, and if it is a larger space, up to a year in advance.
Why six months you ask?
Find the Perfect Space For Your Business
In a perfect world, you would find the perfect space for your business the first week you’re looking. Once you decide it’s the right space, you place a Letter Of Intent (“LOI”) on the property outlining the basic financial terms of the offer. The landlord will review it and either accept or counter.
This process can take between one week and three weeks depending on how aggressive your initial offer is, and how motivated the landlord is. If you do come to terms, it will take an additional 3-5 days to draft a lease. Many times a commercial lease is a custom form of the landlords and can be upwards of 60-80 pages long. Even if it is one of the several standardized forms, it will probably be between 20-30 pages long. Once the landlord has drafted the lease, you will want your attorney to review it and make comments/changes, which then go back to the landlord for their review and approval.
This can take between 1 and 2 weeks. During this time, the landlord will not do any tenant improvement work for your space. Once the lease is signed, you and the landlord can begin working on the tenant improvements; this process includes architects/space planners, bids from contractors, pulling permits and then the actual work.
Depending on the amount of work needed, type of building, and the municipality this can take 6-8 weeks. So even in a perfect world, where you found the perfect location on your first day out, it may be upwards of three months before it is ready to move in.
Typically More Than One Tour
Typically though, it takes more than one tour to find the right space for you. You will need to coordinate these tours with your work schedule (most commercial spaces are only shown Monday – Friday during normal business hours).
On average, it typically takes a month or so just to find the right space. Couple that with the lease negotiations, tenant improvement work, moving, installing phone/internet lines, and getting everything ready, you are looking at between 4-5 months. Ultimately, you know best what your needs are and this will be important to the input for the timing it will take to find the right space.
When you are ready to make the move though, I highly suggest you also get the input from a commercial agent that has experience in the type of asset you are looking to move to. They should be able to ask you the right questions to assess your timing needs, and will be able to provide valuable insight into the planning of your future space requirements.