Comparable leasing rate

[oozze]

Hi,
I wonder if anyone knows where to check comparable rate for a certain area.
I like this my location; however the NNN rate is a killer. 3.20 + .64 / Sq feet. Excluding the NNN, the 3.20 is inline with asking rate for empty spaces around here. But, .64 cents is much higher than average.

It has parking, but will be sharing with next door (currently empty).

For house sales, i can check on zillow.com for comparable. But for leasing, is there such website to see?

Thks!

oozze

[ICP]

I haven't heard of any website like that for the commercial sector... any one else out there heard of one? If so, please post it here.

You might just have to do the research yourself - call a few commercial realtors and compare pricing that way. You could also go into the businesses located near where you want to open your shop and ask them what they pay for their lease and etc.

Let me know if you ever find the website you're looking for!

[oozze]

I still didnt find it.
I use loopnet.com to search my area. somewhat helpful because I can see what landlord asking in the area; however, those places have been empty for awhile now. So, I dont really can use them as Comps.

[iwhenry]

I work in commercial real estate and feel obligated to post a response to this question. I HIGHLY recommend working with a commercial realtor whether you plan to lease or purchase. In many cases, as the tenant, you will not have to pay for the service. The fee is often paid by the landlord or seller.

There are many variables that come into play here (rent and expenses are just the beginning). A good commercial agent will be able to negotiate lease terms that are in your favor. Some common issues to consider:

- Will you be personally responsible for the balance of the lease if your business fails? This is a harsh reality you must consider. In many cases, you will have to provide a personal guarantee that says you will pay should you not be able to carry out your full lease term. This can possibly be negotiated.
- Will the landlord provide a tenant improvement allowance? In some cases, especially where a space sat empty for a while, a landlord will kick in some money to help improve the space. Some tenants don't realize that the landlord's only responsibility is to provide you a plain vanilla shell. It is up to you what you do with it, but you can negotiate an allowance into your lease. Be aware however, this may increase the rent expected over the lease term.
- Will you pay a sliding scale for rent? - You want inexpensive lease rates, espeically while you are getting your business up and running. Some landlords might build into the lease rates that start lower and escalate over the years to help you. For instance, your rates may be in years 1 through 5 respectively $5, $6, $7, $8, $10. Theoretically, you should be much better off by the 5th year, right?
- Will you get any free rent? Again, the longer a space sits the more motivated a landlord gets. He/she might be willing to provide free rent to get you into a lease. It NEVER hurts to ask this question. This is particularly important if you have an extensive build-out to get your space ready for opening. Nothing worse than paying rent on a space that is not generating any revenue.
- How long of a lease term should you sign? Two schools of thought here.... (1)You may be personally responsible should you fail, so is a longer lease in your best interest if you might have to pay even after business is gone. (2) The landlord, just like you, has the option to not renew the lease once the initial term expires (depending on renewal options). If your location is key to your business' success and the lease is terminated, you could be up the proverbial creek. I just witnessed this in a coffee shop where the lease expired and the owner of the shop was left without a location. He was in a hot area of town (pardon the pun) and the landlord decided he could get higher rent out of a full service restaurant. The shop owner was left with no location after 18 years in business, and that brand was not as valuable somewhere else as it was in the previous space. It was a neighborhood shop.

I do not raise these concerns to scare you, but this is a VITAL part of your success. A commercial agent who is worth his weight will get you through the process and start you on a positive note. It is a big mistake to think of these things once you are settled into a lease and a space.

Best regards. I, too, am happy to answer any further questions.

Wayne

[iwhenry]

BTW - After my long-winded response I realized that I did not answer your question. There is a service called Costar (www.costar.com) that commercial agents use to identify and evaluate comps. I am not 100% certain, but I think this is restricted to licensed brokers. If not, I am almost certain the cost would be prohibitive for an individual.