Thread: Commercial/Retail Location Leasing and Buildout Questions

Felix,

I do commercial leasing and property management for a full time job. In general, the landlord will lease you a space on an as is basis and you will be responsible for the tenant improvements.

There are times where the landlord will provide TI's but these will be rare, usually they will just give you a flat $ or per square foot budget and you can spend it how you please. Therefore, you are the one responsible for hiring all the appropriate people and also the inherent risk of the project.

If you have more specific questions, feel free to PM me some more details on the lease, i.e. length, size of the space, rate, etc. and I can help in any way!

Good luck with the business!

Originally Posted by Felix II

I'm planning on doing the unthinkable and starting a business that requires a physical presence.

Before I start, let me say three things:
1. I have searched extensively for this information.

2. I will talk to real-estate agents in the near future, but for now I am at least trying to get informed to the point I don't sound like a total fool.

3. If anybody reads this and feels knowledgeable enough, I'd be happy to pay a consulting fee for a little bit of your time.

I'm having a hard time finding information on setting-up retail locations.

My primary issue is that any space I lease will need to be built-up. I will be adding a few rooms and showers. The problem is, I have no idea how this normally works in a commercial lease.

I've heard everything from the landlord should give me $35+ per sq ft to do my initial buildout, to I have to pay for everything if the landlord even allows it. Does anybody have experience in this domain?

Also, when building inside of a commercial/retail space, what are the typical requirements? Do I need architects, engineers, and licensed contractors to do the work? Obviously I am asking only generally. No matter what responses I get I will contact the appropriate authorities (once I identify them).

Anyway, I'd be eternally indebted to anybody who can shed some light on this subject.

Don't do it.. Just kidding, Still, for all this internet mumbo jumbo, I bet 99.9% of all goods and services are sold in a store or in person, so you are in good company.

My consulting fee is $10k and you better pay.

It all depends on what the landlord is willing to do, I have had leases where the landlord paid for the finish out and others where I paid for the finish out. So it is really how long you want to sign for and how good your credit is and of course are you adding walls or redesigning the entire area.

You mentioned showers so, are you opening a gym of some sort, if so the good part about that is there is no need for walls being created everywhere. But showers-bathroom are a big $$ problem. My bet you would have to pay for these to up front to be put in.

Do you need architects, engineers, and licensed contractors to do the work? Again depending on the landlord, back in the day I tried to have a 24 foot wall built at my top floor office, because they had to be licensed I paid $12,000 bucks for a 24 ft wall that I could build myself for $1,000. I would say if the space is high end, they would make you go licensed, most of the locations I have rented were by owners who didn't care. So You can do what you want. Really, it is all in the nego.

If you are going nice new development, you are looking at the whole shebang.. old shopping center, do what you want.

Btw, always nego.. always, never take what they say as fact, even if they say they will pay for the finish out.. Guess what, they will then charge you a nice 15-20% yearly interest on the money when they add it to your rent.

Any other more specific questions?

Happy to help however I can.

I have 30 years experience renting retail and warehouse space myself as well as renting to other people when I owned property.

I never charge a fee but am happy to help however I can.

Feel free to send me a PM and we can talk via PMs, email or phone.

Great! I really appreciate the responses guys.

These are basically what I was expecting to see and more or less confirm my original suspicion that I'll just have to begin negotiating to see what I can get.

JackEdwards, I don't know if you're being facetious about the $10k or not, but if you're serious I'd be interested in what services you can provide for $10k. Granted, I don't think I could justify such an expenditure (I was thinking more along the lines of $200-$500 per hour) as my needs are very basic at this point. But since I am also a consultant, I absolutely understand and believe such a fee can be more than reasonable.



Anyway, thanks guys. I'd prefer not to take up any more of your time on this issue as it seems my only clear resolution will come during negotiations. Still, I hope you guys won't mind me picking your brains in the coming months as I am sure to have lots of questions (I know very little about B2C). It's great to see so much experience in this area.

What location are you in? I have some experience in b&m retail. My first business I got zero TI (build-out money) second one around 30k and third just under $70k, my latest build, the landlord is not giving me money (All my spaces are around 1200sqft). I've gotten first month rent free and 3 months half rent also. It depends on a lot of factors and what condition you are receiving the space (new, empty aka cold-dark-shell or a vanilla shell or a vacated space). Also has something to do with how hot the location is and what concept you are bringing in.

I would strongly suggest a commercial real estate broker. Typically, they would find you the space and you don't have to pay them as they get paid a commission by the landlord when you close the deal. The trick is to find someone you can trust and always push them for more. Alot of these brokers will just push you to take the first offer, negotiate the hell out of the space and ask for the impossible. always negotiate the lowest rent as they will most likely always counter offer and ask for as much TI as you can. Be creative in your negotiation, nothing is impossible as most brokers will lead you to believe. But it's for sure a give-and-take. The stronger your concept, the more they are willing to negotiate.

Here are a few tips off the top of my head:


-negotiate the first month(s) free rent or half rent, or both whatever you can get away with. It helps tremendously in those first few months when you are still building up your clientele and getting things going.

-talk to neighboring tenants who moved in during the peak of the recession and ask how much rent they are paying. Make sure to ask as many as you can as you will get different answers.

-find a trustworthy commercial/retail re broker, you might have to interview a few

-***DON'T SKIMP OUT ON AN ATTORNEY TO REVIEW YOUR LEASE - sorry for the caps, but this is friggin' important. save money on other things but do not save money on this, pay what it takes to get the best quality.. Trust me, I would have been screwed by funky things on those 70-100 page leases if I did not have a quality attorney. depending on landord, they might even insert things as for you to install things you don't need (good example: grease traps), or upgrade your electrical service just for the benifit of future tenants, have your monthly sales reporting sent certified by a CPA instead of just a personal cert, admin fees, minimum staffing, minimum hours, etc, etc.. this is probably the most valuable advice I can give you. listen to it

-Find a GC (General Contractor) and get at least 3-4 bids and references before signing a contract

-Make sure to lock down an "exclusive" with the landlord if you are selling a specific product or service.. lets say I am opening a nail salon.. I would ask for an exclusive that no other tenants that provide the services (or goods that you are selling/specialize in) can come in.

-Every landlord asks for atleast 3% rent increase after the first year. Try to make it so it happens in the 3rd or 4th year or not at all.

There are alot of other misc things, but these are the only things I really remember right now.. Just PM or feel free to ask here.

Thanks, Darkjediii. I will keep these words in mind.
I've already been searching for real estate broker so I'm glad to know I'm on the right track. I will also definitely get a good lawyer.

I will be locating my business in Utah. But I'm out of town for the next two months so at this point I have to work on other aspects of the business plan and save the real estate for later.