Negotiating a Lease for a Retail Space - No Experience, Need Some General Advice

[kaylyn23]

I am thinking about leasing retail space to use for my e-commerce company. It's very difficult to find warehouse space in my area less than 10000 s/f. I'm currently renting from a company that bought a large warehouse and subdivided it into smaller units. I'm paying $1800/month for 400s/f which I feel like is extremely high ($54/sf/year). On the plus side, the fee is all inclusive (internet, utilities, trash, taxes, etc.). I'm in NJ in a moderate COL area, not near NYC.

The unit that I'm looking at is 1200 s/f, and the cost is $21.50 (NNN - Rent is $16, CAM/insurance/taxes are $5.50). I exchanged preliminary emails with the broker, and that's been the extent of my contact. They mentioned that they typically do 5 year leases.

My warehouse space was the first lease I ever entered, so I don't have much experience with commercial real estate. I wanted to see if I could get some general advice on how to approach something like this. I originally thought that maybe I could get a broker to assist me, but I realized that they have no interest in a deal this small.

I don't know if there are specific questions I should ask, or if there are any potential issues I should consider. These are some of my general thoughts, and if anyone could help with any of them, I would be very appreciative!

1. Can I negotiate pricing at all? I'm assuming not, especially if I want a shorter term, but would I look foolish to ask?
2. Is it likely that they would consider a 2 year term? It's not about me doubting my business...it has more to do with being able to move to a proper warehouse should the opportunity arise. That's my goal, but I'm not ready for that much space at this time.
3. Are there likely to be additional costs beyond what the broker outlined? I know I'll have to pay internet, utilities, and various incidental expenses. I'm not sure if I'm missing anything else.
4. I assume a personal guarantee is standard, and I'm okay with that.
5. I don't need any type of special buildout. It would be nice to get access to the unit a week prior to commencement (so I can move inventory before my existing lease expires), though I have no idea if that is a reasonable or typical request.
6. I plan to have an attorney review the lease prior to signing.

 

[eberzas]

@kaylyn23

1. Yes you can negotiate pricing. The ask is just the ask. Number 2 kinda negates this.
2. They might ask for a higher price for the shorter lease term as in 2 years they will need to jump through the hoops of relisting it etc if you don't stay.
3. They would outline any additional costs on their end. Trash pickup might be a big one? Also utilities might be much higher on a commercial space vs residential in your area, I'm sure you could ask them for an estimate though.
4. Yes.
5. If it's empty I imagine they would be fine with that, though they might also ask for you to pay for that week.
6. Yes.

 

[kaylyn23]

@eberzas Thank you. This is very helpful. I appreciate it.

 

[fadespace]

@kaylyn23 Look locally at small properties for lease by smaller brokers. Call them and see if they'll represent you. Especially if you already have a site and just need a little advice and help understanding what's appropriate to negotiate, one will probably help you. Source: currently searching for a similar property with a small broker.

 

[dbellpreach]

@kaylyn23 I’m a complete noob also just signed my first lease today. I live in a VHCOL area and pay $1k/month for 300 sq foot office, also all inclusive. I started out looking at loopnet and got discouraged with the 2 year minimum leases since I’m not sure how it will pan out, plus similar concerns that an agent/broker wouldn’t take my fledging situation seriously. I took advice from someone else who said try Marketplace and Craigslist.

The place I’m renting is a mom and pop situation not listed with any of the commercial sites and I found them through Marketplace.