How To Find & Lease Commercial Space for Rent in 2022 [Full Guide]
What’s the worst kept secret this year? Well, it could be that commercial space for rent in Columbus, Ohio, is booming.
Why? Thanks to a confluence of factors, namely an influx of younger residents, robust institutions of higher learning, a fortuitous location smack dab within a few hours’ drive of the bulk of the U.S. population, and a lower cost of living as compared to the coasts. And, let’s not forget the acceleration of the e-commerce/digital economy transition, leaving many Americans flush with cash! So, why not consider a commercial space for lease or even invest in commercial space for sale? It is a hotter commodity now than in the Columbus Region’s recent past.
Of course, such exuberance comes with advantages and disadvantages. For starters, it’s a competitive landscape out there. And since commercial real estate for rent or lease is not generally subject to being listed on the MLS (Multi-Listing Service), it can be challenging to find an ideal commercial property for rent in Columbus, Ohio, and the surrounding region in the first place.
The following guide reviews the best practices to find and lease commercial space in this dynamic, diverse, and increasingly destination city, Columbus.
TABLE OF CONTENTS:
- What’s the Difference Between a Commercial Lease and Rent?
- What Are the Types of Commercial Leases?
- Objectives and Principles When Uncovering Commercial Space for Rent
- Best Practices To Search Commercial Properties for Rent
- How To Find Commercial Space To Lease in Columbus, Ohio – In Six Steps
- Reasons to be Cautious About Commercial Space for Lease
- When You Need To Find Commercial Property for Rent in Columbus, Ohio, Talk to the Expert!
The distinction between a commercial lease and rent is time. A formal agreement dictates the duration of a lease, whereas a rental is short-term and not necessarily contractually obligated.
For startup businesses or those new to a location, a month-to-month commercial space to rent may be ideal. A more established company might choose a commercial space to lease because the contract offers more security over the long term.
What does it mean to rent commercial space?
Rent relates to a short-term agreement between the owner of the commercial property and the renter (or tenant – basically, the individual that pays a fee to use property owned by the other party). A rental agreement is simple and defines the period when a renter will use the commercial space for rent and its monthly fee.
Ultimately, the landlord has the upper hand in the relationship and can change the terms of the agreement due to the short-term nature of the commercial rental space.
What does it mean to lease commercial real estate?
A commercial lease is a legally binding contract that details the relationship between a tenant and a landlord. Like a rental agreement, the landlord and tenant will consent to a specific length of time, known as the “term,” and a regular payment (e.g., monthly, quarterly) for using the property. In contrast with a rental, a lease agreement includes many more stringent clauses for the commercial space to lease, such as the following:
- Use of Premises
- Taxes and Assessments
- Compliance with Laws
- Maintenance and Repairs
- Indemnity and Insurance
- Alterations and Improvements
- Damage to Premises
- Surrender of Premises
- Notices and Payment of Rent
- Assignments (such as a sublease)
The lease agreement is not automatically extended at the end of the period, and it is necessary to change the lease agreement for further use of the property. Other leases include a clause that allows the tenant to extend to monthly rental payments after the base lease term has expired.
What is a commercial property lease to own?
Another option for renters is a commercial property lease to own. This is, well, exactly as it sounds – the lease allows the tenant to apply the rent towards the sale price, should they decide to buy the commercial space for rent. If you’re not ready for commercial space to buy but like that possibility, this may be a solutiion for you.
Commercial leases require a long-term commitment that can be costly and include many details. While it’s best to have a commercial lease broker and attorney review the agreement first, a lease is not as intimidating as you may think. Once you decide on a commercial space to lease, you negotiate the price and terms with the commercial property owner or landlord. Once you reach an agreement, you execute the agreement, and then you’re free to move into your new commercial rental space.”
In commercial lease agreements, you’ll often see “gross” and “net.” Both terms reflect how the rent is calculated in the lease agreement. But when it comes to net leases, there are many variations. So, what are the different types of commercial leases?
Gross Lease (or Full-Service Lease)
The tenant pays for the rent and utilities in one lump sum in a gross lease. And the landlord pays for all operating expenses, such as maintenance, property taxes, and insurance. The rent is typically higher with a gross lease since the landlord has to pay for the extra expenses.
The most common type of commercial lease agreement is the net lease. In a net lease, the tenant pays for the base rent and some, most, or all operating expenses (e.g., property taxes, insurance, building maintenance, utilities, janitorial services, and property management fees). The landlord pays for the remaining operating expenses, if applicable. The base rent price is typically reduced because of the additional costs for tenants in net leases. There are four types of net leases, each with various levels of responsibility for the tenant:
Single Net Lease (N Lease)
This is the simplest type of net lease, yet less commonly found in commercial real estate leases. In a single net lease, the tenant pays for the base rent plus one operating expense, usually the property tax. The landlord is responsible for all other operating costs, including property insurance and building maintenance.
Double Net Lease (Net-Net or NN Lease)
This is the most common type of net lease for commercial real estate in general. The tenant pays for the base rent plus the property tax and insurance premiums in a double net lease. The landlord is responsible for all other structural operating expenses, including building maintenance.
Triple Net Lease (NNN Lease)
This is the most common type of net lease for commercial warehouses and other freestanding commercial buildings. In a triple net lease, the tenant pays for the base rent plus all property taxes, insurance premiums, and maintenance costs. The landlord is responsible for all other structural operating expenses and repairs. The upside for a tenant is that they have more structural control over their commercial rental space. The most prominent issue tenants face with this type of net lease is maintenance expenses. When maintenance costs are higher than anticipated, tenants may try to end their triple net lease early. As such, landlords often stipulate that the tenant can’t terminate the lease early for any reason; this is referred to as an absolute net lease (or bondable net lease); more on this type of lease below.
Absolute Net Lease (Absolute Triple Net Lease or Bondable Net Lease)
Absolute Net Lease is the most uncommon type of net lease and is intended for larger-sized tenants. An absolute net lease is similar to a triple net lease but more strict and binding. In this type of commercial lease, the tenant is responsible for the base rent plus all property taxes, insurance premiums, and maintenance costs, including structural repairs. In addition, the tenant pays all building expenses, including structural repairs, despite the circumstance, even in the case of a natural disaster. The property owner is completely relieved of any financial responsibilities under an absolute net lease.
Modified Gross Lease
A modified gross lease combines a gross lease and a net lease. In a modified gross lease, the tenant pays for the base rent, utilities, and a portion of the operating expenses. The landlord is responsible for all other operating expenses.
A percentage lease is typically only used for retail space for lease. The tenant pays for the base rent, utilities, and a pre-determined percentage of the business’s sales in a percentage lease. The landlord is responsible for some or all operating expenses.
Every negotiated commercial lease has upsides and downsides, but ultimately, success comes via mutual satisfaction. In the case of a gross lease, the tenant may come out ahead, while a net lease may favor the landlord. Fortunately, the in-depth analysis of all leases for commercial space for rent should set you on a clear path during the negotiation process.
Anyone seeking commercial space to lease also has their own needs depending upon the business in question and their ambitions. Much depends on when and why you desire the space. Regardless, there are a few objectives and principles, ground rules, if you will, that should be top of mind when beginning your search.
- Know your top-line expense. Rent, in general, will be the most significant expense you will incur in your business each month. Whether you choose to pay in monthly installments, quarterly, or yearly for your commercial rental space, staying within budget can make or break your business.
- Size and scalability matter.Know the size and true scalability of any commercial property. If only starting in a new venture or newly expanding, you should try to envision (and strategize for) the needs in the future.
- Start a business checklist.The state of your business is paramount. If you are a startup, the probability that you can open the doors and immediately begin using any commercial space to rent is unlikely. You will need time to build a clientele or allow your existing clientele to find and get comfortable with your new commercial space. If you have employees, they also need an adjustment period as travel times may differ, and the footprint of the new space might be different. Take stock of your business, its assets, and its employees.
- Lawyer up. Get a commercial real estate attorney specializing in commercial space for lease. The negotiation process may be challenging to navigate, and you must have the resources to get the best investment or deal on the property lease. Consider this: Some commercial properties need upgrades before you can use them sufficiently, and some landlords have difficulty leasing property and might agree to a “free rent period*.”
- Mix it up with mixed-use. Do not rule out mixed-use properties! The live-work-play hybrid (as we like to call it) tends to be a splendid finance saver; business owners can rent out or live in one part of the property and use the other for their primary business. These might not work well for large companies but can generate significant ROI or savings for smaller companies. When running a business in a mixed-use space rental, it is also essential to remember that existing tenants can sometimes cause noise and distractions to a business. However, if a business owner is the only tenant in a mixed-use property, the combination of living and working areas is a winning strategy.
- Subtype selectivity. Know what type of commercial space to Commercial real estate comes in many varieties, and leasing any space will have variables that you must consider. There are many different types of commercial spaces. Still, the most common are commercial office space for rent, restaurant space, retail space to rent, industrial space to rent (including warehouse rentals), hospitality property, and special purpose properties.
*A free-rent period allows you to occupy, make renovations, and prep a commercial property in Columbus, OH, for a specified period without paying rent. Utilities will still not be included, but an attorney can work with the landlord to explore this possibility. An attorney specializing in commercial property leases will review all aspects of the lease agreement to determine optimal savings incorporate or omit clauses to your benefit. Commercial real estate attorneys also refer to this as rent abatement, and it is worth discussing with a knowledgeable professional.
Each commercial property type requires a different approach to finding and leasing the space. Let’s run down the list of sectors and consider some best practices. These strategies are appropriate when searching commercial space for sale, as well.
Commercial Office Space: Office space comes in many forms, from co-working facilities to private properties, which tend to be more prevalent. In addition, office space tenants usually have fewer maintenance needs or specific requests than those who rent a retail store. So, your business may have some negotiating power concerning rental terms and pricing. But make sure you ask all the right questions when negotiating office space for lease.
Restaurant and Retail Space: Whether you are searching for a restaurant or retail space for rent, you must start in an area that is either commercially zoned or has commercial/residential zoning. The foot traffic is generally higher than that of office space, and the requirements for following building code law and zoning requirements are also more significant.
Industrial/Warehouse Space: Not only is industrial space for rent challenging to find because of the high demand, but it can also be difficult due to stringent building codes, zoning, and fire safety laws. Expect to invest with a property owner or pay part of the portions for renovations to suit your business needs.
Hospitality Property: The hospitality sector spans hotels, motels, and bed-and-breakfast locations, so uncovering a commercial space for rent usually depends on the vision. Leasing requirements vary tremendously between a small-scale bed-and-breakfast and a large-scale motel/hotel. Hire a commercial real estate attorney with experience in commercial real estate leases. And, as with other commercial spaces for rent, you must meet code requirements and zoning regulations.
Special Use Property: First, let’s start with the definition of special use or special purpose properties: a space designed for a particular need; think about amusement facilities, parks, playgrounds, parking lots, stadiums, movie theaters, zoos, and even museums. A special use property’s design, layout, and building materials must suit your specific needs. As such, specialty commercial space for rent is challenging for most renters to find.
Unique properties also require extra attention from the municipality or locality. The property may need to fulfill an economic need, either tourism or practical (e.g., parking lots). Only responsible ownership is granted the special use designation, and zoning boards might suggest a more feasible option. Area officials will also research how the property functions for the desired usage before granting the designation.
Much special use research is needed, and finding a special use commercial space to rent can be frustrating. It is often easier to find a commercial property already zoned for special purpose use rather than convincing a governmental body to agree with your vision. Public safety always comes first in any special use lease or build-out, as does future use of the property and its viability to impact a community positively.
As mentioned above, commercial properties are generally not listed on the MLS; individual investors seeking commercial space to lease can find it frustrating. The best methods of locating commercial space for rent, regardless of the property type, are as follows:
- Step 1: Contact a commercial real estate broker like The Robert Weiler Company. Commercial real estate brokers have access to information on properties that are not generally known to the public. It is the easiest way to locate and lease a commercial space for rent. Commercial brokers are also knowledgeable about local areas, the zoning laws, and the types of neighborhoods surrounding the commercial properties for rent that you’re interested in.
- Step 2: This might sound basic, but simply driving or walking around your targeted areas can provide many options! As you pass by properties, you will likely find signs indicating there is commercial space for rent. These types of “finds” generally occur with mixed-use and special-use designations. Multifamily real estate firms find most of their properties through this method; some even employ individuals to walk and drive through neighborhoods searching for large multifamily properties that have ROI potential.
- Step 3: Check the local County Clerk’s Office of court offices. They may contain public information about ownership of properties. If a property has been sitting empty, it is possible to negotiate an excellent deal with its owner. Of course, research why the property is vacant, as you do not want to invest in leasing a commercial property with problems. High crime, flooding issues, or other deterrents may exist. A pending commercial property for sale should also cause concern as you will not know who the landlord is until the sale closes.
- Step 4: Check local malls and shopping centers. Many have unused retail locations for rent or spaces that are in transition. Jumping into these opportunities can be salvation when seeking a commercial property for lease in Columbus, Ohio – especially in Downtown Columbus, as it’s a prime area.
- Step 5: Perform online research as some owners and landlords may advertise listings of commercial space for rent. Be careful with this method because what you see online is not always what you get. Filters and other tricks with pictures can present details that are not as they appear in person.
- Step 6: Attend local networking events or Chamber of Commerce meetings. Nothing can substitute for speaking with business owners and government officials on the ground. You can meet landlords or find commercial space for rent through word of mouth.
Do not throw caution to the wind and sign any lease in a hurry. An attorney and commercial real estate broker are well worth the fees. If you need to repair a property or a property is not taken care of, your business can suffer greatly.
Inspect all neighborhoods and speak with other property owners. Leasing in a less-than-stellar area can harm your business. Crime statistics are available from the local police; although names are not released, data on the amount of crime is readily available. Rely on percentages and the types of crimes (i.e., burglaries are less friendly to your customers than parking tickets).
Ensure that parking is ample and allow for handicapped spaces if onsite purchases occur. Don’t ever assume that the business next door will gladly share their parking. That generally does not happen.
Have a budget in mind and stick with it. Barely getting by with the amount of rent necessary each month leaves a business hard-pressed to meet other unexpected expenses. Remember that if you need to scale, get a big enough property. While you do not want to over rent, you do not want to under rent either.
Research the landlord’s reputation, if possible, along with other renters. A problem landlord is a problem for your business, period.
Contact your insurance company to determine how much rental insurance you will need. And rental insurance should, indeed, be on the agenda. If any damages or property losses occur that are not covered by the landlord’s insurance, you will wish you had insurance. Agents work with you to determine the dollar amount you should carry.
The Columbus commercial real estate market is red hot. And with cutthroat competition, it’s easy to feel left out. Or worse, you lack the knowledge to proceed with your search for commercial space for lease.
But as is often the case in life, haste makes waste; rushed decisions and ill-conceived plans can backfire faster than you can say…. commercial space for rent in Columbus, OH. That’s true in all business deals, especially when leasing a property for your business needs.
No business should seek to rent or lease without a plan, just as no one should establish a company without a thoughtful strategy. Both are roadmaps to success and not a step you should ever skip. Of course, the same is true when buying commercial real estate for sale.
At The Robert Weiler Company, Central Ohio’s trusted commercial real estate experts since 1938, we’ve seen the commercial property market boom and, at times, bust. But with nearly 85 years of experience, we are the area’s best-suited company to uncover commercial space for rent in Columbus, Ohio. Call us today at 614-221-4286 to find the perfect space for your business.