Lease Agreement for Warehouse Space
Lease agreement for warehouse space is a document signed between two parties for the lease of a warehouse.3 min read
2. Elements of a Lease/ Points of Negotiation
Lease agreement for warehouse space is a document signed between two parties for the lease of a warehouse. It is vital to understand the provisions of a warehouse space lease agreement to know your rights and responsibilities and protect your interests.
Warehouse Leasing Tips
Compare Cubic Footage and Square Footage
When leasing warehouse space, you should pay close attention to the cubic footage and square footage of the building. Cubic footage indicates the total volume of the warehouse space regarding the ceiling height, width, and length of the structure. Note that higher cubic footage does not always translate to more space.
For instance, you want to lease a warehouse with a considerable amount of cubic footage and high ceilings, but the width and lengths are small. It may not be possible to arrange your stock vertically, making the space less useful compared to another structure with lower ceilings but longer and wider dimensions.
Evaluate Climate Control and Safety Measures
If your stock is a perishable item or something that requires a controlled environment, you may need a functional climate control system in a warehouse. Be sure that the heating and cooling system in the warehouse is suitable for your specific needs.
Additionally, assess the effectiveness of the safety and security measures in the warehouse. Does the warehouse have functional alarms and security cameras installed? Is there modern fire suppression hardware on the premises?
Assess the Wiring
Warehouses often have special wiring unlike the type used in residential and office buildings. Double check to make sure that the installation is correct and compatible with any machinery you need to operate in the space. Before signing the lease, it is advisable to have an electrical engineer check that nothing is out of place regarding wiring.
Make sure the loading docks can accommodate articulated trailers if your operations will require heavy-duty vehicles pulling up to your warehouse. Additionally, make sure there is adequate parking space for employee's onsite or nearby if, there will be a need for that.
Understand the Terms of the Lease
It is essential to understand clearly the provisions of the lease before signing. Be sure to know your duties and responsibilities regarding rent as well as other fees and expenses.
Elements of a Lease/ Points of Negotiation
Before the signing of a lease agreement, most of the points in the contract would have been discussed extensively during negotiations. The brokers of both parties will discuss and negotiate each aspect of the lease during the letter of intent (LOI) process. They will prepare a formal lease agreement only when both parties have agreed on the terms.
The lease term is a vital element in the leasing process, and the concept is simple. All commercial lease agreements have a duration of a specific number of months during which you are expected to pay for the use of the space. For this reason, you must be clear about how long you want to lease the space because the agreement will be legally binding on you.
Short Term vs. Long Term Leases
There are two types of lease terms including:
- Short term lease.
- Long term lease.
The type of lease term you choose depends on the nature of your business and your expense structure. Short-term leases are more flexible as they do not require making long-term commitments. These type of lease terms allow a tenant to change buildings more frequently compared to what a long-term lease would allow.
However, short-term leases make it challenging to plan for future rental costs. The reason is that a tenant needs to renegotiate the lease terms, which may lead to rent hikes. Generally, short leases provide fewer concessions such as free rent and tenant improvement dollars because the landlord would want to recover expenses within the duration of the contract.
On the other hand, long-term leases ensure the tenant pays a lower rental rate for a more extended period. Landlords also offer more concessions for longer leases because a credible, long-term tenant is in their best interests. However, a long-term lease restricts a tenant's ability to change space at short notice. Your company's situation will determine the ideal term for you.
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