Start earlier than you think
For most businesses, the search should start 9 to 12 months before the current lease ends. That leaves time to tour, negotiate, get permits and build out the space. Larger or specialized space, such as cold storage, heavy power or a truck yard, can take longer.
Location costs you every day
Rent is paid once a month, but location is paid every day in drive time, delivery cost and hiring. A warehouse a few miles closer to the ports, a freeway or your customers can save more in truck time than it costs in rent. For offices and shops, parking, visibility and the commute for your staff matter just as much. List what your business needs from its location before you compare rents.
Know the three lease types
| Lease type | What the rent covers | What you pay on top |
|---|---|---|
| NNN (triple net) | The space only | Your share of property tax, insurance and common area maintenance (CAM) |
| Modified gross | The space plus some building costs | The costs the lease lists as yours, often utilities or janitorial |
| Full service gross | Space, taxes, insurance, maintenance and usually utilities | Little or nothing beyond your own improvements |
Industrial space in Southern California is usually NNN. Office space is often full service gross. Comparing them on asking rent alone is how tenants overpay.
Compare the total cost, not the asking rent
Two spaces with different rents, increases, free rent and move-in costs can end up far apart over a five-year term. Add up:
- Base rent for every month, including yearly increases.
- NNN or other charges on top of rent.
- Free rent months at the start.
- Your share of improvements, cabling, signs and moving.
Our free commercial lease cost calculator does this for two spaces side by side and shows the result as a chart.
Check the space works before you fall in love with it
- Zoning and a business license for your exact use.
- Power, parking, loading doors and ceiling height for your operation.
- Restrooms, accessibility and fire code for your number of employees.
- Business park rules on signs, outdoor storage and trucks.
- The last two years of CAM charges, so you are not surprised next year.
A simple timeline
- Months 12 to 9: set your needs and budget, and list the areas that work.
- Months 9 to 6: tour, compare total costs and send letters of intent to the top two or three.
- Months 6 to 4: negotiate the lease, check permits and price the improvements.
- Months 4 to 0: build out, set up utilities and internet, and move.
Negotiate the terms that matter
Rent is one line. Free rent, tenant improvement allowances, renewal options, the right to sublease, caps on yearly CAM increases and who pays for roof and HVAC repairs often matter more over the term. A tenant representative compares options and negotiates these points; in most commercial leases the landlord pays the leasing commission, and the arrangement is agreed in writing before any tour.
Thinking about buying instead?
If you plan to stay for many years, owning can beat renting. The lease or own calculator compares rent with buying using an SBA 504 loan, and shows how much of the answer depends on value growth.