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 Seven things to consider before signing a lease for business premises

 

 For many entrepreneurs, signing a lease for their first business premises marks a seminal moment in the growth of their ventures. After months or years in the home or garage, it can seem like the first real step into the business world. It is often also one of their more substantial deals which, if they get it wrong, can cost them many tens of thousands of rands.

Sadhna Maharaj, regional property manager at Business Partners Limited (BUSINESS/PARTNERS), offers the following checklist for business owners who are about to sign a lease.

1. Location

This, as everyone knows, is the most important aspect of any property. A prospective business tenant needs to consider how easy the site is to access for clients, workers and suppliers. Manufacturers often need to prioritise accessibility for bulky delivery vehicles, labour intensive businesses need good public transport close by so that workers can easily reach the premises, and almost nobody envies the retailers’ task of making sure that their premises is super-accessible for just the right clientele.

2. Price

The affordability of the rental for the business is crucial, and the first step for the prospective tenant is to make sure that every possible hidden cost of renting the premises is added to the calculation. Apart from the base rental, most landlords add operational costs to the monthly bill, which can include rates and taxes, insurance, security costs, cleaning costs and refuse removal. Some landlords itemise municipal rates and levies separately.

Make sure you understand and check the pro-rata calculation for a unit's contribution toward communal costs in a multi tenanted complex.

Furthermore a business needs to consider the cost of utilities such as electricity, water and data, which may be more expensive than expected. A badly insulated place can push up electricity consumption and weak internet access could limit the choice of service providers.

When it comes to maintenance of the building, the tenant is usually responsible for maintaining the internal leased premises for day-to-day items such as the ablution facilities, lighting and fixing wear and tear on the building caused by the activities of the business.

Finally, the prospective tenant needs to understand the annual rental escalation, which should be clearly stipulated in the lease agreement. It is a good idea to work out the last month's rental to check once again the affordability of the premises over the whole lease period.

3. The lease period

Depending on your business, you may need a place for as short as a few months as you try out a new concept, a year or two if you plan to grow very fast, or as long as possible if you are a local retailer. Consider your needs and find out how open the landlord is to negotiating the ideal lease period with you.

4. Size

If you choose a premises that is too small, you end up stifling the growth of your business for lack of space. If you overestimate your future growth on the other hand, you end up paying rent for unused space. Find premises just the right size, and a year later it you may be bursting at the seams. It is difficult to work out whether a business space is going to be big enough or too big over the course of the lease. Careful thought must be given to the planned growth rate of the business and the extra space, if any, that the business will need as it grows.

Thought must also be given to whether the layout of the building suits your operational needs such as production flow, and whether the property provides you with the correct ratio of office space to warehouse, workshop or retail space. In the ideal premises, all of the leased space is usable.

5. Infrastructure

In uncertain times of load-shedding and drought, it is probably a good idea to not simply assume a stable electricity and water supply and to ask about back-up infrastructure. Good data access and cellular coverage is crucial infrastructure for any business premises nowadays, and your own peculiar needs such as visitor's parking, loading bays and sprinkler systems need to be considered carefully.

The green aspects of a building are becoming more important, so check for factors such as insulation, water storage and recycling.

6. Image

Not surprisingly, we are back at the importance of the location, this time for the value that the area in general and the look and feel of the building in particular will add to your brand. Up-market, hip, safe, edgy, quiet, exclusive, vibey are all attributes that different areas can add to the image of your business, and becomes an important consideration.

7. The landlord

Signing a lease puts you into a fixed business arrangement with the owner of the building for a number of years, involving a substantial amount of money. It is worth checking the reputation of the landlord before you sign. Speaking to fellow tenants and neighbours should give you a good idea of whether the landlord cares as much for the tenants as for the building.

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