Leasing warehouse space is a significant decision, and there are several common mistakes people make when entering into warehouse lease agreements. Avoiding these pitfalls can help ensure a smoother and more successful leasing experience. Through our experience, we’ve seen many, so we put this blog together to guide tenants navigate these mistakes and provide solutions.
Avoiding these common mistakes requires careful planning, thorough research, and professional guidance.
Neglecting Due Diligence:
· Mistake: Failing to thoroughly research the warehouse space, including its location, condition, and suitability for your specific business needs.
· Solution: During negotiations, conduct a comprehensive due diligence process, including site visits, inspections, and assessments of the property's infrastructure and accessibility. Also, verify zoning that will allow your business to operate.
Overlooking Lease Terms and Conditions:
· Mistake: Rushing into a lease without carefully reviewing and understanding all the terms and conditions, including rental rates, lease duration, and renewal options. Very common mistake from tenants.
· Solution: Have the right industrial real estate broker and attorney. Review the lease agreement with these professionals to ensure you fully understand your rights and responsibilities.
Ignoring Hidden Costs:
· Mistake: Focusing solely on the base rent and overlooking additional costs such as common area maintenance (CAM) charges, property taxes, and utility expenses. Now more than ever, CAM is an important item to review.
· Solution: Request from landlord a breakdown and history of operating expenses. This will help define the total cost of occupancy, including all associated fees and expenses, before signing the lease. Additionally, select a landlord that will hold property long term; sale of property will trigger reassessment and higher property taxes.
Inadequate Space Planning:
· Mistake: Failing to accurately assess your space needs and plan for future growth. Leasing either too much or too little space can be costly.
· Solution: Conduct a thorough analysis of your space requirements, including storage needs, office space, and operational layouts. Get an architect or space planner involved. Plan for potential expansion or downsizing.
Neglecting Infrastructure and Amenities:
· Mistake: Not considering the availability and condition of essential infrastructure like loading docks, clear height, security systems, HVAC (heating, ventilation, and air conditioning) and refrigeration.
· Solution: Ensure that the warehouse has the necessary features and amenities to support your business operations effectively. Define on lease the assigned parking and loading area.
Overlooking Accessibility and Location:
· Mistake: Choosing a warehouse solely based on rental rates and ignoring factors like transportation access, proximity to suppliers and customers, and logistical efficiency.
· Solution: Select a location that optimizes your supply chain and distribution network while considering factors like traffic patterns and transportation routes. Also, a location what works best for employees and customers. This location might not be the cheapest option.
Engaging with experienced real estate professionals and legal advisors can significantly mitigate potential pitfalls when leasing warehouse space.
Neglecting Lease Negotiations:
· Mistake: Failing to negotiate lease terms to your advantage, such as seeking rent concessions, tenant improvement allowances, or flexibility in lease duration.
· Solution: Hire the right industrial real estate broker. Together, engage in meaningful negotiations to secure favorable terms that align with your business goals.
Skipping Broker and/or Legal Counsel:
· Mistake: Signing a lease without having a broker and legal counsel; relying solely on the landlord's broker and attorney for advice.
· Solution: Have an experienced broker and attorney negotiate and review the lease to protect your interests and ensure that all agreements meet local laws.
Ignoring Lease Renewal and Exit Provisions:
· Mistake: Not considering lease renewal options or exit strategies, which can lead to difficulties when the lease term ends.
· Solution: Set a reminder to give notice to Landlord for lease renewal. Your broker should also be reminding you about this. Plan ahead by understanding your options for renewal, termination, and any associated notice requirements.
Inadequate Communication:
· Mistake: Failing to establish open and clear communication with the landlord, which can lead to misunderstandings or disputes.
· Solution: During the lease term, maintain regular communication with the landlord and promptly address any concerns or maintenance issues. Request monthly or quarterly call with landlord and management team.
Avoiding these common mistakes requires careful planning, thorough research, and professional guidance. Engaging with experienced real estate professionals and legal advisors can significantly mitigate potential pitfalls when leasing warehouse space.
Didn’t see your question or problem on this Blog? Feel free to reach out to us with questions on your existing lease or future expansion. Our team has helped business owners for over 40 years.
About the ComReal Miami Industrial Team: The ComReal Miami Industrial Team has been assisting companies with their South Florida real estate needs for over 40 years. The industrial team specializes in the sales and leasing of industrial properties. Visit Warehouses Market and/or call 786-433-2380 for more information.
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