There are multiple decisions to be made during your industrial real estate transaction, and one of the most challenging is relating to the length of your lease. There’s no single right answer that will apply in every scenario, but there is a way to hedge your bets before you make a final decision. Your single best resource when you’re deciding industrial lease length is the experience of your agent. Here’s why.
Your Agent’s Experience
An agent who has the experience to guide you through the lease process does so by asking the right questions. And when it comes to lease length, understanding your own needs and goals is critical. If your agent fails to inquire about the following, be wary about his level of experience. Here’s what you need to answer to make an educated guess about the perfect lease length.
How stable is your business? How much fluctuation do you anticipate in your future space needs?
Can you keep the lease flexible in the event of expansion or downsizing?
What sort of tenant improvements are needed, and who’s footing that bill?
Are rates expected to increase dramatically? What sort of current and historic data supports this projection?
How will location affect my success?
How complicated or costly is it to move my business?
Can I get a lower rent if I sign a longer term?
On that last point, keep in mind that basic economic law doesn’t always apply, and current market phasing often has a strong impact. In some instances, the best rates are actually for shorter terms. If you haven’t read our last few issues of the Market Advisor, download those now to see how northern Nevada industrial real estate has been performing over the last few quarters.
When it comes to lease length, the goal is choosing a timeframe that best suits your needs without sacrificing flexibility down the road. Leaning on your agent’s guidance, experience, and understanding of where the market is and where it’s likely to go is a wise move, particularly when you combine it with honest answers to the questions above.
If you’re having trouble answering them, ask your agent. You can also download our free 13-Step Lease Process Guide to learn more about the leasing process.
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