Due Diligence Checklist Part 2

Seeking retail space for lease? If you have begun your search, then we hope that means you have already nailed down two important items. These items include a budget and determining how much square footage you need. After that comes the fun part: finding some viable options.
Before you find and lease the retail space of your dreams, you need to do your research. This research is called due diligence in the commercial real estate world. That is where this article comes in handy. To help understand all the important components of both the retail space for lease and the leasing contract, we’ve outlined the important phases of due diligence.
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Retail Space For Lease: The Phases of Due Diligence

Retail space for leaseTo be most effective in any type of research, you must compartmentalize to get the job done. From process start to finish, there are going to be certain aspects of finding a retail space for lease that you hold under a microscope.
We’ve grouped these hyper-focused aspects into four major areas of due diligence: Location, Space, Contract and Broker. In each, we break out what are the most important items to know. Today we cover the last two: The Contract and The Broker.
Make sure to catch Part 1 of our Due Diligence Checklist where we cover the areas of Location and Space.

Retail Space For Lease: The Contract

The dreaded contract for lease. A long and intimidating legal document, your lease for commercial space is the key to your financial success, or demise. While often not that dramatic, as commercial brokers we have seen more than a few cases of “buyers remorse”. The below information will help you avoid any issues down the line.
Always remember the golden rule: In the first draft of the lease landlords will throw in any charge they can. It’s up to you and your hired CRE broker to negotiate.

Operating Expenses

When a tenant first enters into a lease agreement they assume the cost of rent (paying for the actual space used, i.e. price per SF) is their only monthly obligation in the lease. Two things happen with this: 1) there ends up being additional rent (operating expenses) that the tenant did not factor in and is responsible for. Or, 2) Operating costs are included in the price per square foot and the tenant didn’t realize.

Responsibility/Repairs

When you lease a space as opposed to buying, most repairs are the responsibility of the landlord/owner. Although, be sure to read that contract because there are always exceptions. In your lease document it should explicitly outline who is financially responsible for any space repairs or alterations (i) prior to moving in, (ii) during the course of the lease and (iii) upon exiting.
Always remember to do a very thorough space inspection before signing any lease. During this process, be sure to properly document any and all necessary repairs. Also note that in CRE, it is mostly accepted that large repairs to the retail space that will be there when you leave. Roofing, drywall, plumbing, will be the financial responsibility of the landlord/owner and can be deducted from your rent.

Retail Space For Lease: The Broker

Retail space for lease - the brokerThis is one due diligence item that often gets overlooked. The broker you choose to represent you heavily influences a successful retail lease and subsequent transition. No two brokers are created equal. To ensure a seamless process, where you aren’t leaving money on the table, heed our advice.
If you want additional tips on what to look for in a broker check out this recent post, Hiring a Commercial Real Estate Broker? Avoid These Stereotypes.

Options

Sadly, many brokers want to control a deal and don’t want to split the commission. To keep more money in their pocket they will only show you their listings. The problem with this? No one broker controls every single retail space for lease in your market. If they aren’t willing to show you available competitors’ space then you are missing out on tons of opportunities. Make sure to ask your potential broker about your options up front.

Have questions about Charlotte retail space for lease?

Opening or moving a business is stressful and leasing commercial real estate is a very large contributing factor. If you have questions about any part of the scouting, negotiation or leasing of retail space in and around Charlotte, North Carolina contact one of our retail-leasing experts today.
To read more about how to find retail space for lease, check out more of our blogs!

SVN Percival PartnersPercival Partners is one of Charlotte’s most recognized and respected commercial real estate firms with more than 50 years experience in the region. Our professional and experienced real estate Advisors are in the business of listening, understanding, and adding value. No matter the commercial property type you own or seek, you can count on the Percival Partners team to maximize your return and peace of mind.  To reach us, you can call us at 704.632.1000 or follow us on Twitter at @SVNPercival, LinkedIn or Facebook.