How to Lease Commercial Property in 6 Steps

Secure your premises on the best possible lease terms

How to lease commercial property

How to Lease Commercial Property

How to lease commercial property that is:

    1. right for your business; and
    2. on competitive commercial terms

It is a combination of market intelligence and good process.

Depending on the type of property you wish to lease, the locality, and the vacancy rates, you may have to compete to obtain your desired property.

We know how it feels to wait for a response on your lease offer or, even worse, miss out on your dream property because a competitor has beaten you to it.

Get your offer to the top of the pile by making it competitive and compelling.

To do so, we recommend that you follow this process.

 

    1. Be Proactive – Circulate your premises brief to real estate agents and follow up. It probably takes 3-6 follow-ups before your premises requirements are top of mind.

At this point, real estate agents will be tabling off-market opportunities or premises that are coming to market.  Because of your proactive and persistent approach, you will be ahead of the pack.

If a listing comes up that matches your premises brief, don’t wait, contact the real estate agent and organise an inspection.

 

    1. Inspect – Nothing beats an onsite inspection to qualify the property against your premises brief and to work out what consents and timeframes (if any) you will need to modify the property to suit your business needs.

This is also an opportunity to build a relationship with the listing agent and find out about the landlord’s desired lease terms, leasing motivations, and checklist for the ideal tenant.

 

    1. Research – Having inspected the property, gather your market intelligence on:
      • the property
      • how long the property has been vacant
      • utilities available
      • any specific requirements for your business to be able to operate from that property
      • leasing trends
      • market rental rates
      • likely lease incentives

Gathering your market intelligence is a critical step in how to lease commercial property.

 

    1. Submit Lease Offer – Having done your research, we recommend submitting a lease offer outlining the key commercial terms and conditions rather than waiting for an agent to draw up an Agreement to Lease; this is a faster process. It focuses the mind on the critical elements of the deal, you retain control of the negotiating process, and you break tradition (just because the space is there on the Agreement to Lease does not mean you must personally guarantee it).

It is also prudent to itemise any work you will need to carry out and signage you propose to install. It is best to get everything signed off at this stage.

It is likely that the landlord will not know your business. We recommend including a short business profile and personal bio with your lease offer; this personalises the things and gives the landlord context about you as a tenant. At the end of the day, they want to know that you are a safe tenant bet? 

Occasionally, and depending on the type of premises and nature of the transaction, the landlord may require business financials to satisfy that you can afford to pay the rent.

 

    1. Negotiate – It is unlikely that the landlord will agree to all your terms in the first instance, so prepare to negotiate. They will likely push back on the commercial terms that don’t align with their desired terms; this is standard. Stick to your guns on matters important for your business and trade off the nice to have but non-essential terms.

We find that it assists negotiations if you explain the reasoning behind debated terms and conditions.  That moves the discussion from subjective to objective. It is harder to refuse an objective request.

 

    1. Document – Once you have agreed on the commercial terms with the landlord, the next step is to document them in an Agreement to Lease, which is usually prepared by the real estate agent. Once the Agreement to Lease is signed by all parties, you have a binding legal agreement.

In Australia, the usual practice is to go straight to Deed of Lease to document the transaction.   

Once the leasing transaction is documented, you can gain access for design and temporary signage purposes.

When all the lease conditions are satisfied (if any), the landlord’s solicitor will prepare a Deed of Lease to be signed by the landlord and the tenant. 

 

These six steps outlining how to lease commercial property will empower you and your business to secure the best commercial lease terms on your ideal property. Securing the right property on competitive commercial terms in the first instance means you are ahead of the curve and can hit the ground running!

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