If you’re producing, storing, fulfilling orders for or distributing goods, then you need an industrial commercial real estate lease for your operation. Ideally, you will operate in the space for a very long time, probably longer than any of the products you are manufacturing or distributing. It’s so important to have your commercial real estate leasing team in place, to identify and negotiate the best deal for you. You don’t want to walk away from money or your legal rights that you could have, if you’re smart about your industrial commercial lease negotiations!

Here’s a list of hot items to consider in your industrial commercial real estate lease. Just because you don’t get everything, you might be able to negotiate a tenant allowance (TI) to do things like deferred maintenance, abate hazardous materials, or bring the building up to code and outfit it specifically for your needs. Have these answers and your commercial real estate attorney will be prepared to secure the legal and financial protections you need!

Shipping and Receiving (Truck docks or rail)

  1. How much square footage is needed for the warehouse and how much for the office?
  2. How many truck level doors?
  3. Is a drive-in door needed each for shipping and/or receiving? What size?
  4. What are the bay sizes (column spacing)?
  5. What is the clear height?
  6. What is the turning radius?

Utilities- comfort for people and products

  1. What is the supplied HVAC capacity?
  2. What are the minimum and maximum temperature requirements?
  3. What type of heating/cooling is required, if any, in the warehouse?
  4. Does the building have any green technologies?
  5. How much power is supplied to the building in volts and amps?
  6. What is the lighting requirement in terms of foot candles required?
  7. What is the budget for lighting installation, on-going maintenance and electricity costs?
  8. What kind of sprinklers, building security, and life systems are required?

Floors- inside and outside, don’t forget the docks.

  1. Is there any special coating or sealant needed on the floor?
  2. What is the floor loading capacity?
  3. Is reinforced concrete required in the loading area?
  4. Is heavy-duty asphalt required at the truck docks?
  5. What is the optimal floor plate size?
  6. Does any equipment need to be recessed into the floor?

Special Equipment- is any necessary?

  1. Will specialized equipment or machinery be used?
  2. Is an overhead crane required?

The Building- what do you know about it?

  1. What is the deferred maintenance?
  2. What are the accessibility issues with the building?
  3. Who were previous tenants? Is there a possibility of hazardous materials?
  4. Are there any business hours or zoning requirements?

Partner smart and have your commercial real estate leasing team in place so nothing is left out of your deal!


Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.

A commercial real estate lease should be unique and negotiated especially for Tenant’s specific needs. There’s a lot to consider, but there are some common elements in virtually every commercial real estate lease that should be carefully negotiated and completely understood before Tenant signs on the dotted line. It’s a good investment to hire an expert to review the commercial real estate lease and assist in negotiating a fair and equitable agreement.

 

Here are 5 tips when negotiating any type of commercial real estate lease:

1) Limit that personal guarantee! A personal guarantee goes beyond the business entity. The signer of a personal guarantee is responsible, personally, for coming up with the cash if the business doesn’t have enough money. Landlord wants to protect the cash flow, which is understandable, but there’s a lot more on the line for the guarantor- who knows what events could happen, outside of your control, that affects Tenant’s ability to pay the rent? If the business runs out of money, then Landlord can come after your personal assets. Try offering a hefty deposit to reduce or limit the guaranty, or to reduce it.

2) Watch those insurance requirements! Tenant should carry its own insurance (if there’s a franchisor in the mix, they will usually set the requirements), but the requirements should make sense within the context of the business. If it’s a NNN (triple net) lease, then Tenant is contributing to Landlord’s insurance costs. Check out my post on Proportionate Share and make sure Tenant isn’t overpaying for Landlord’s insurance- or any other expense. Also, make sure Landlord is actually carrying insurance!

3) Delivery vs. Acceptance of the location. Tenant expects to receive the space in a certain condition. If the space is already built out, Tenant wants it clean, ready to furnish and fixture, and vacant. All of the systems in the space should work, as well. If the space isn’t already built out, then Landlord and Tenant need to negotiate the condition in which it will be delivered. Will Landlord deliver the space finished out to Tenant’s specifications (a vanilla box) or will the space be roughly built out and ready for Tenant to come in and finish the final touches (a gray shell)? If Landlord delivers the space to Tenant, and it’s non-compliant, Tenant should not accept delivery. The commercial real estate lease (and other key terms, like rent) should hinge on Tenant getting exactly what it negotiated for (it’s okay to have an exception for punch-list items, especially in a newly constructed space.). Few things are worse than having to accept a space and pay rent when Tenant isn’t able to operate its business inside the location.

4) Parking. Very few locations can rely completely on public transportation to bring employees and customers. It’s important people have a safe, well-lit parking area that is easy to navigate. Tenant may be concerned about directional signage, dedicated parking spaces, or parking charges. Ask for what Tenant (and possibly the franchisor) wants in the commercial real estate lease.

5) Exclusivity. It’s important to you (and the franchisor, if there is one) to be the only tenant with that particular kind of business in the immediate vicinity. Landlord shouldn’t put a direct competitor right next door. If another landlord wants to put a competitor in a space on their property, there isn’t much Tenant can do, but it makes sense, when negotiating a commercial real estate lease, that Landlord will respect Tenant’s desire to be unique within the shopping center. Tenant will want to have remedies if Landlord doesn’t abide by the commercial real estate lease, but at the same time, don’t make it too easy for Landlord to kick Tenant out of the space to install a competitor in there, instead.

Bonus tip! In case you need another reason to read your commercial real estate lease closely and understand it:

None of the commercial real estate lease provisions should be automatic, such as a termination or a rent acceleration- Tenant should get notice before these occur. Tenant will want to negotiate for notice (and cure periods) in the event of a default, so Landlord doesn’t declare an automatic default.

A good commercial real estate leasing attorney can negotiate your commercial real estate lease, to give you security and reduce legal uncertainty so you can focus on your operations!


Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.

Fungible goods was something I learned about in economics (that and I can’t hand-draw a graph to save my life). Basically, units of widgets are all the same, and they are all are interchangeable. So each fungible item can be exchanged for one exactly like it, like different copies of the same book. They’re identical.

Fungible goods doesn’t cut it anymore in today’s competitive marketplace. The name of the game today is customization and personalization.

I want something made just for me, and I want to make sure it works. How can online storefronts get consumers to try out their products, without the hassle of returns or frustration in picking the wrong thing? Make it a convenient and novel experience.

Pop-up or temporary store commercial real estate concepts allow an online-only brand or concept try out physical retailing, or to experiment with an omni-channel retail strategy. Consumers get choices, and no waiting time. (Impulse purchases, anyone?)

What does this mean to the average shopper? Instead of 3 red lipstick choices, I have 25 to choose from, and I can’t tell the difference in the shades on my computer. Or there are 17 different leg cuts on a pair of pants, but I can’t figure out which ones will actually work for me, because the ones I bought last season and ripped were discontinued, and I have to start shopping all over again. I can’t buy a fungible good, I can’t replace the item I have with an identical one, because I want something different or the same item doesn’t exist any more. So I head out to the physical store, along with lots of other consumers, to see and try products in real life. Consumers want something novel, current and relevant. Pop-up shops can provide exactly that experience and capture those dollars.

Once I can actually see the shade of red in the tube and compare it in real light, instead of the glow from my computer screen, I’ve got confidence I’m making the right choice, and I’ll be the first to click and order the lipstick of my dreams online, since I know what I’m getting. If I’m not price sensitive, I might even pay a premium to have the lipstick right then- instant gratification.

Pop-ups or other super-short-term leases are usually around 6 months to 1 year, but could be even shorter. The commercial real estate lease form for a pop-up is usually a lot shorter than a traditional one, and provides both parties with greater flexibility to test drive a site, a concept, and to maximize the use of space to fit with community needs.

It might be a short commercial real estate lease, but you still have to read it and know what the rights and obligations are of each party. A short lease is still a binding legal document. As consumers have more options, retailers have to work to grab those eyeballs and those dollars, and that means providing a venue to showcase those goods and curating a novel engaging experience, making retail shopping an occasion or an adventure, not another chore to cram into a busy day.

Online retailers need to become commercial real estate destinations too, in creative and interesting ways that resonate with their audience and the community. That means a commercial real estate lease. While it pays to be creative in retailing, watch out for “creativity” in a short-term or pop-up lease, that could cost a lot more than the tenant bargained for!


Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.