There is a stark difference between commercial and residential real state. To begin with, commercial real estate deals wih space for business operations while residential is exazctly that. Things run a little differentely in commercial real estate than they do in residential. As a person who is only used to renting spaces to live in, you could get baffled by the red tape and formaility of commercial real estate. Even thigs like utilities are handled differentely in commercial real estate. Below are some pointers to help you understand renting commercial space.
- Goodwill
This is a number attached to a business’ good reputation. Ypou will almost always be required to pay an amount for good will. Please note that this amount is different from a deposit. A deposit is refundable at the end of tenancy whle goodwill is not. When a landlord quotes an amount for the goodwill, it denotes how much they think that specific location is worth to your business. In some cases the goodwill will be way more than the rent and deposit combined. The more goodwill youa re charged the more you should expect the location to work for your business. Usually, new buidlinbgs charge a little less goodwill than the older ones. You can predict whether good will will be high by looking at the age of the building as well as placement.
- Rent review
Rent review is a term in rental agreements that stipulates that the rent will be examined and maybe even changed. This rent review is scheduled after prescribed periods. In most cases it is done after five years. This section on the agreement will include something called an inflationary increase. After a few years the agreement will stipulate that the rent will be increased by a certain percentage. Residentaila rental agreements may have this kind of term but it is usually just a mere formality. Rarely are they exercised.
- Trade fixtures
It is expected that when a tenant commits to s pace they will make changes. Comercial property landlords will usually be on borad with whatever the tenant would like to do. This si as long as the changes are not structuirally radical. This is not a standard term in residentioal rental agreements. However, it is necessary in commercial rentl agreements. This term allows the tenant to understand that they are allowed t make whatever changes necessary for their business but also understand the limits to their authority.
- Measurements
When looking at residential property you look for how many bedrooms and how the describe the kitchen so you know its size. However, in commercial real estate units are described by their metric measurements. It can be hard tpo discern exactly how much space you need. In some cases like in malls the rent is charged by square meter.
- Length of lease
This is a period during which the current contract will be active. After the mentioned period one will be required to renew their contract or move out. This term is found in both residential and commercial real estate. However, it is taklen more seriously in commercial real estate. At the end of the conmtyract duration there might also be a rent review. The landlord might decide not tolet you renew your contract anyway. G
