While it’s no secret that Commercial Real Estate Leases tend to be longer than other types of leases that can certainly work to the benefit of a small business. Here’s two reasons why:
Predictable, Controllable Costs?
Although the fear factor may plague a small business owner when contemplating a long term lease, don’t let it be the deciding factor in how your commercial real estate lease is structured. Being able predict your costs as your business grows can be a determining factor in how successful you are. For example, imagine your business growing and seeing increased profits only to find out that most of your additional profit margin will be eaten up upon your lease renewal. A long term lease on the other hand can keep your costs steady and predictable while your profits grow.
If you’re concerned the future is too uncertain to commit to a long term lease consider negotiating the appropriate clauses into your CRE long term lease to ease your concerns. For example, if you’re worried that you’ll have to buyout the lease if your business outgrows the space, or worst case scenario, if your business goes bust, a break clause or assignment clause could address your fears while providing you with the benefits of a long term lease. Although this is just one example, whatever your worries are talk to your commercial real estate broker so that they can present options to calm your fears and mitigate risk while still providing some cost certainty for the future. The correct clauses in your long term CRE lease can neutralize your fears for the future while allowing you to enjoy the predictability of a long term lease.
Keeping your Location
Whether your B2B or B2C your customers are likely to get use to your location. Providing them with a stable, consistent location certainly reflects on the stability of your business. While one move won’t send the wrong signals, you’ll certainly want to send the right message by providing a consistent location(s) over the long run. Imagine your customers and clients working your location into their commute, social activities, or their business day only to find out that your location won’t be convenient to them any more.
A move may require you to find new customers or clients to make up for lost revenue. One of the benefits of a long term lease is consistency for your customers, clients and even your employees who may not be able to move move with your business. After all a few miles may make the difference in their day. Even something as simple as how often they see your signage might make a big difference in how often your customers think of you, or even knowing that you’re still around. A long term commercial real estate lease might protect your business from lost customers and clients. Consider favorable options to renew, even in a long term lease, to protect the relationship between your business and its customers or clients.
When it comes to profitability, the predictability of your CRE lease can turn out to be priceless. Knowing your costs and being sure your customers know your location can go a long way in helping your business achieve its long term goals.
A seasoned commercial real estate broker can help you negotiate favorable conditions for your commercial real estate lease and take some of the uncertainty out of future of your business.