1. Determine Your Space Needs and Location
Since there are so many commercial properties in San Diego, the first step to finding the right office space is to set up property parameters to limit your search. The most important factors to consider are location, size, budget, and accessibility.
In order to attract and retain good employees, you want your business location to be convenient for your ideal employee. You can easily conduct an analysis on highly populated areas in San Diego with your target demographic. Also, you might want to consider your ideal client. If you want to attract foot traffic into your office you’ll need to be in a location that brings visibility to your business.
Commercial lease terms span over multiple years and size should not inhibit your ability to grow as a business. You need to consider the space you need right now, but also consider the space you will need in the future.
Consider your maximum monthly budget for your rent expense so you can limit your search to office space you can actually afford. A good way to calculate your expected monthly expense is to multiple the average quoted rental rate per square foot by the square footage your business needs. Then, take this annual amount and divide by 12 months to get your expected monthly rental amount. Don’t forget to include your expected utilities, annual rent increases, expected build out costs and common area maintenance fees (CAM)
It is critically important to have adequate parking! Most commercial leases have a separate clause for parking and you do not wan’t to overlook negotiating this. In downtown markets especially, parking costs can be significant for your employees
2. Understand the Market Landscape
San Diego Commercial Real Estate Market
It’s important to understand accurate market pricing and comparable property data that can be used in your favor when negotiating your lease. A tenant broker can help you pull information on properties of interest and offer valuable insight on landlord reputations, current tenant issues and local rental rates.
Different Types of Commercial Leases
There are multiple types of commercial leases, each corresponding to different responsibilities and obligations of the landlord and the tenant. Check out our comprehensive guide to understanding the various Different Types of Commercial Leases and who pays for what.
3. Find a Commercial Real Estate Broker
Why You Need a Broker
A broker is there to help you facilitate the sometimes stressful and confusing process of finding and negotiating a new lease. They serve as market experts and professional negotiators that advocate for your interests, not your Landlord’s. You want to choose a broker that genuinely cares about you and the success of your business. If you have a broker that’s too successful, you’ll become a low priority. Experience and proven success are key.
How a broker can help you:
- Industry knowledge to help you find the right space for your business
- Accurate and up to date market data
- Negotiating skills for advantageous lease terms that save you money
- Access to financing options
- Manages your lease so you can focus on your business
- Network of relationships and Landlord’s will actually return your calls
It’s not required to use a broker, but they can help you save a tremendous amount of time, risk and money.
How is a Commercial Real Estate Broker Paid?
A tenant broker’s commission fee is typically paid by the Landlord not the tenant. It does not cost you to hire a broker to represent your interests!
4. How to Find the Right Office Space
Factors to Consider
With a good understanding of the San Diego market, you can shorten your list of qualified properties. Take into consideration location, property features/amentities and the landlord’s reputation. Leases can span over several years so it is extremely beneficial to know if current tenants are trying to get out of the building because of problems with the landlord.
Tour Qualified Properties
Once you and your broker have identified quality spaces, it’s time to take a tour. Your broker will be able to ask questions and point out key details you might miss. After your site visits, your broker will submit a request for proposal (RFP) to the qualified buildings you’re still interested in. They can also create a comparative lease analysis that will help you compare proposals on key lease terms to aid in your decision making process. Almost always, the lease terms are the main deciding factor between your options.
5. The Negotiation Process
Negotiate Lease Terms and Conditions
Negotiations can be stressful and challenging on your own. Key terms like exclusivity use, renewal options, rent increases, assignability, length of the lease, tenant improvements and rent abatement are up for negotiation. Your broker is an invaluable asset at this stage in gaining advantageous lease terms.
6. Build-Out and Tenant Improvements
Customize Your New Office Space
With a successful negotiation, it’s time to customize and build out your new space. Expansion and improvements on the existing space are necessary to the success of your business. Whether you’re a law firm needing private offices and cubicle stations or a startup company optimizing an open floor plan, a broker can expertly negotiate the costs of construction be covered by the landlord.
Commercial real estate is complicated. There’s a lot of legal details and industry jargon that make it challenging to negotiate your lease on your own. Gain market insights and negotiating power by hiring a tenant broker to advocate for your interests.
With our extensive background practicing law and real estate, we’ve helped hundreds of clients navigate the leasing process in San Diego. If you’d like to schedule a consultation and discuss your space needs, we’d love to help. Email Todd Bulich at firstname.lastname@example.org or call us anytime at (619) 235-9959 to get started.