DFW Commercial Real Estate Basics: What Businesses and Franchisees Need to Know
Competition for prime DFW commercial real estate can be fierce. Therefore, it’s not solely the landlord who needs to impress with a great space and location. Prospective commercial tenants must also sway landlords. Here are some of the commercial real estate basics to help sell yourself as the ideal tenant when negotiating with a property owner or manager.
The ideal commercial tenant ensures the property remains a good investment through lucrative economic times and recessions. And the local business owner or franchisee must secure a deal that works well for both parties. The way to do that is with proper preparation, sound market knowledge, and good negotiation skills.
This piece reveals what businesses and franchisees need to know about commercial real estate in DFW and how to put your best foot forward when negotiating a commercial lease.
#1 Come Well Prepared
Preparation is the foundation of commercial real estate basics. You must convey your precise business needs and explain how the commercial space will fulfill those requirements. Of course, the landlord has ways to attract and retain commercial tenants, convincing you why they make the ideal landlord. But it is also your job to convince them why you will make a great tenant.
Knowledge is power here. So be sure to research beforehand so you can ask the right questions and negotiate with confidence.
The five commercial real estate basic areas of due diligence should include:
Make a list of your property needs (must-haves and nice-to-haves)
Research the property owner
Research the area, its economic history and zoning laws
Understand applicable environmental nuisance laws
Prepare your bio or CV, business plan, and past 3 years business financials
Good prep saves time and removes the risk of potential confusion or misunderstandings. For example, a minute detail you may discover can change your plans if the property is not a good fit for your business after all. And it’s better to find that out during the prep stage than face-to-face negotiations.
#2 Prepare to Negotiate
Savvy tenants know how to negotiate in ways that benefit both parties. Knowing actual DFW commercial real estate costs and realistic requests keep you focused during negotiations, so be sure to acquaint yourself with the potential property, comparable rents, and term structures. Also, look for tenant inducements and prepare to leverage hidden costs, highlighting any improvements you intend to put into the space.
Commercial Real Estate Basics: Most Items Are Negotiable
Be mindful that most aspects of a lease are up for negotiation, including the term length. Smart tenants are not afraid to discuss lease conditions. Likewise, CRE landlords respect well-informed tenants who know what they’re talking about and are confident to negotiate. After all, good tenants are the lifeblood of America’s CRE business. Indeed, they make the process profitable and enjoyable for landlords.
Flexible Lease Durations for Commercial Properties For property owners, the ideal tenants sign long lease durations. However, this is one area where you may want flexibility. For example, a two- or three-year lease with an option to extend for the same price might suit you better than a five-year agreement.
Use this CRE lease checklist to help prepare your negotiation strategies:
Research comparable rents and term structures
Make note of any tenant inducements
Consider the length of the CRE lease
Uncover and consider any hidden costs
Request favorable clauses, like “Tenant Improvement (TI)” allocations
Closely examine the termination clause
Commercial leases can be complex, time-consuming formal agreements that are difficult to navigate. Always read the lease from front to back before entering negotiations, and do this as many times as necessary until you understand it completely. Using an independent commercial broker for your tenant representation provides you with additional, experienced eyes on your prospective lease. Lease knowledge will strengthen your negotiating hand when asking for changes or compromises.
Beware of Hidden Fees Inexperienced CRE lease negotiators often overlook hidden fees. They can take on many forms, but the typical charges to watch out for are management fees, administrative costs, and building surveys.
#3 Final Review Before Signing
When everything looks perfect, it still pays to review the lease agreement again before signing. Reading it a few days later, with rested eyes, will help you pick up any previously missed details. But it’s not only you who needs to inspect the lease. You also want at least one CRE attorney to go through the legal document with a fine-tooth comb. Remember, the property owner is sure to have a CRE attorney on their team, and so should you.
Use this checklist when reviewing your CRE lease (modify as needed):
Heads of terms
Review the competitor clause
Space permissions (allowed/not allowed)
Termination or break clause
Renewal options and terms
Commercial rent escalation clause
Maintenance and repair agreements
Other costs, hidden or otherwise
Now let’s look at reasons to hire a commercial real estate attorney.
The Role of a CRE Tenant Representative
CRE tenant reps are skilled at reviewing complex commercial lease contracts. They can see or interpret aspects that business owners and franchisees may miss or misinterpret. Even with a straightforward lease, it pays to partner with a CRE brokerage to review the entire legal document and any amendments. They will check that you have all due diligence material, help find leverage for negotiation, and ensure your team has reviewed everything thoroughly before signing the final contract.
Closing Comments on DFW Commercial Real Estate Basics
The best CRE tenants know what they want and how to negotiate the best offer. They are fair and responsible and form good relationships with property owners or agent reps.
Commercial real estate tenants can approach property owners directly. However, it pays to have an expert commercial real estate broker in your corner if you’re inexperienced or short on time. They work closely with you before going into final negotiations. CRE brokers fully understand the market and navigate complex commercial leases, leaving no stone unturned. And they will also help you quickly find the perfect property if you’re still looking.
Experts in Commercial Real Estate and Property Management
Do you need a CRE broker who is knowledgeable and highly respected in the CRE industry? LiNC Commercial Realty knows everything about the CRE market and how to aggressively negotiate tenant improvement allowances on your behalf. We make all the right strategic decisions and will confidently guide you every step of the way.