What to Know Before Signing a Commercial Lease

by Derick SullivanJanuary 19, 2023


Opinions expressed by Entrepreneur contributors are their own.

When it is time to start looking for a commercial space to lease, there are many items to keep in mind. If this is the first time you have leased a commercial space, there are certain factors I recommend you know in advance before beginning your search.

1. Zoning

First and foremost, you must understand the concept of zoning. Zoning laws control what types of businesses may operate on any specific property — next, list cities where you are interested in opening your business.

Once that list is created, you can either go online to the cities’ planning departments’ websites, call the planning departments or visit in person. I recommend you visit in person since it can expedite the process. When you speak to the person in planning, let them know the exact details of the business you will be opening.

Remember that once you have an address of interest, you will need to check in again with the city. This time you will give the planning department the address and confirm that you can open your business at the address. Also, ask the planning department if your use is permitted by right or by permit. If it is by right then, you should be good to go regarding your use being allowed to operate. However, if the planning department mentions the use is allowed by permit, you will need to ask follow-up questions. The follow-up questions should include finding out what permits you will need, how long they will take to obtain and how much the permit cost.

Related: 6 Overlooked Investment Opportunities in Commercial Real Estate

2. Size

Once you understand the zoning you are looking for, you need to know your ideal space size. If you need to know the square footage for your type of business, I recommend you research it before starting your search. You can quickly get an idea of the size space you need by using the internet and searching square footage and your use. I also recommend walking into similar businesses to get an understanding of space.

Related: Criteria to Consider When Renting Commercial Space

3. Customer demographics

Next on the list is to know who your customers are through demographics. Age, average incomes and population are the key demographics you will want to keep in mind. For reference, in my markets of the Inland Empire and San Gabriel Valley regions of Southern California, most retailers seek sites with a minimum of 100,000 people within a three-mile radius.

Additionally, you will want to know when your business will be the busiest. If you expect lunch to be critical, you will also want to know the daytime population numbers near the potential space you will be leasing.

Knowing who your customers are will assist with understanding if visibility is vital to your business. Are you a destination tenant or an impulse tenant? If you are an impulse tenant, you need high visibility. Without high visibility, potential customers will have more difficulty seeing you and will not be able to visit your store.

An excellent example of an impulse tenant is dessert. People often decide to have ice cream because they see it in a shopping center. Since prime street front space leases at a premium, you will have more leverage with landlords if visibility is not a significant concern for your business.

Related: What to Do When Your Ideal Customer Isn’t Who You Expected

4. Traffic counts

If you need prime visibility, you will also want to pay attention to traffic counts. In commercial real estate, cars per day are examined. As a point of reference, 25,000 vehicles per day on the main street where the site is located is a minimum number many retailers are looking for when high-traffic areas are needed.

5. Access

Next to consider is access. It does not matter if you are an impulse or destination tenant. Access is a critical component in deciding on a space to lease. When figuring out the access for a potential site, make sure to drive all streets in all directions. Please pay attention to the road’s lines and whether they are broken. Also, pay attention to street medians and no U-turn signs. You want to make sure your customers will be able to access your business conveniently.

Related: How to Make Your Product More Accessible to Customers

6. Signage

Signage can also be critical. Most centers have monument signs. Often tenants think that if they are leasing a space that had a monument sign prior, they will be able to take over that sign. That is not the case. You only have the right to use a monument sign if it is in your lease.

When considering a center, I recommend you fully drive the entire center and take pictures of all the monument signs. In your offer, you must include these images of the monument signs and the specific panels you request rights to utilize.

Related: 5 Major Leasing Deal Points to Know Before Signing a Lease

It is essential to realize that there are basics in site selection. If your company has done its homework in advance, your site selection process will be simplified when looking for commercial space to lease. If you have an understanding of what you are looking for but also keep an open mind, the process of finding a location will run smoother.


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