Navigating the Commercial Leasing Process: A Guide for Business Owners

May 2

Approaching leasing in the commercial real estate world can feel like a foray into the Wild West.

Unlike the regulated procedures for buying and selling real estate in Colorado, leasing is a different ballgame. The state government doesn't oversee leasing the same way, which means that almost every aspect of a lease deal is negotiable. It's an intricate and strategic process.

To help you navigate the commercial leasing landscape effectively, I've outlined the high-level process that combines my expertise with industry-standard scenarios. However, it's essential to note that the preparation and execution of a lease deal involve much more than what's summarized below, especially in today's market.

Recognizing the Key Challenges of Commercial Leasing

Finding a suitable property is typically the easier part of the process. The real challenge lies in aligning your business structure, finances, and strategy with current market conditions. In my experience, these factors contribute to about ninety percent of the effort in a successful lease deal.

Simplifying the Complexities of Commercial Leasing: 8 Steps to Success

I'll work closely with you to determine the best plan of action that suits your specific needs and objectives. Our expertise extends to newcomers and those with prior leasing experience. We'll guide you through each step of the way.

Here's a preview of what to expect

Step 1: Introduction

This preliminary meeting or call allows us to get to know one another and determine whether we are the right fit to work together.
I'll ask you a series of questions about your business, timeline, budget, and goals and will ask you to organize a package of documents in preparation for onboarding.

Step 2: Onboarding

We will review critical documents and discuss our plan for getting you into the ideal space for your business.
I'll address any questions and provide contacts and resources to assist you.
Based on our review and discussion, clients often have additional considerations and action items to complete, and onboarding may last for several weeks, depending on their preparedness.

Step 3: Property Search & Tours

I will present you with a shared tracker document listing various properties that fit your search criteria. You will review them and provide me with feedback to help further define the search parameters.
For properties you are interested in, I will contact the landlord's representative, share details about your business and requirements, and ask questions.
I will share this information with you and arrange tours of the properties you want to see based on your schedule and availability.

Step 4: LOI & Preliminary Negotiations

Once we've identified a property you wish to move toward leasing, we will submit a Letter of Intent (LOI) to the owner or landlord to formally express your interest.
The LOI is non-binding and provides the landlord with your wishes for the deal terms and plans for how you will use the space.
We will submit one signed version of the letter and another editable version that the owner or their representative may use to "redline" or make changes to. We will exchange "redline versions" until we reach an agreement or one party chooses to disengage.
During this time, we will keep an eye on the market and research the ownership and history of the building. If you plan to build out or renovate the property, we will have early discussions with design-build teams.

Step 5: Lease Review & Negotiations

The landlord may take some time to produce a lease that reflects the terms outlined in the LOI.
As we await the lease, progress can continue on our end regarding any anticipated buildout or improvements you plan to make to the space.
When the lease is received, we will each review it separately and then together. Typically, it's a lengthy document that covers a great deal of information. It's essential to take your time reviewing it to ensure that every word in it is understood.
As with the Letter of Intent, we will exchange lease versions with the landlord's representative that reflect our desired changes until the final terms are settled.
Remember, unlike Contracts to Buy and Sell Real Estate, the Colorado Real Estate Commission does not regulate leases. Leases are drafted by attorneys representing the interests of the landlord. Therefore, having your attorney review the lease is always a good idea.

Step 6: Lease Execution

When the final terms of the lease have been agreed upon, and all parties have reviewed the final version, both landlord and tenant will execute the lease by signing it.
In many cases, the landlord will also require a personal lease guarantee and additional supporting documents from the tenant. We will discuss this during the onboarding step.

Step 7: Occupancy

Several factors can impact when you take occupancy of the space. If the space is move-in ready, it may happen upon lease execution. If improvements or construction need to be completed first, it may take several months.
If construction is required, we will have discussed and planned for this since our first introduction.

Step 8: Plans for the Future

Once you've settled into your space, I will stay in touch and remain ready to discuss plans for the future of your business. Perhaps, you'd like to open another location in a few years or transition from leasing a space to purchasing a building. We'll work together to identify goals you can start toward as soon as makes sense for you and your business.

Collaboration for a Successful Leasing Journey

The Henry Group Real Estate team and I are committed to ensuring your commercial leasing journey succeeds. With our knowledge, experience, and personalized guidance, you can overcome the challenges of leasing in the "Wild West" of the commercial real estate world.

By understanding the unique nature of commercial leasing and its lack of regulatory restrictions, we can help you negotiate favorable terms that align with your business goals. Whether it's lease duration, rental rates, maintenance responsibilities, or tenant improvements, our strategic approach aims to maximize your benefits while minimizing potential risks.

Montana Rae

Montana Rae is a Colorado-based commercial real estate leasing and sales advisor with Henry Group Real Estate in Denver. She specializes in providing services for retail, healthcare, office, and fitness/wellness business owners. Click here to read her story.