A Business Owner’s Guide
Leasing commercial office space is an inevitable part of doing business, regardless of how small or large your company is or how much office space you’re looking to lock down. Calgary’s commercial real estate landscape is an active one, particularly downtown and in the surrounding areas. Calgary has 41.2 million square feet of downtown office space and 24.7 million square feet of suburban office space across all classes, offering a wide variety of office space types and sizes depending on your company’s needs and budget. Whether it’s a 500 sq. ft. simple office space in one of the city’s towering skyscrapers or a quaint, sandstone 60s bungalow-turned-commercial office space in one of Calgary’s trendy suburban communities, there is something for every business in downtown Calgary.
However, downtown is also a highly desired and competitive place to find and negotiate office space. In this metropolitan area with a bustling networking scene, businesses looking to succeed want to be where the action is. Local restaurants are packed during lunch and dinner hours with men and women in suits engrossed in power lunches, and the best deals are closed with handshakes. This makes it a fast-paced real estate environment for those seeking to lease, renew or sublease their office space in Calgary. New skyscrapers go up almost annually, offering new, innovative office area and opening up space in older character buildings when tenants move to the newer buildings. Rates are competitive and great spaces in the downtown core tend to be leased quickly. You will want to work with someone familiar with the commercial real estate scene who can help get you the best office space for your business, inform you of spaces you wouldn’t otherwise have thought of or discovered on your own, and help you navigate the legal side of commercial leases and negotiations. This guide will answer some common questions or concerns you may have about how to lease commercial real estate.
Are Commercial Leases Negotiable?
Yes, unlike the days when you were looking to rent your first apartment and had to accept the rental prices asked by landlords, commercial lease agreements are negotiable. You are not expected to agree to all the terms immediately, so be prepared to go back and forth.
While many landlords use commercial lease agreement templates, which can be found online and altered to meet their needs, any clauses included in the agreement can become negotiable by either party. However, the ability to negotiate a lease will largely depend on the real estate market at the time. If the leasing market has a low vacancy rate with high demand for space, the ability for a tenant to negotiate will be limited. On the other hand, if the vacancy rate is high, tenants have more power to negotiate as landlords compete for tenants in the marketplace.
The items which can be negotiated depending on what kind of lease you have and other provisions that may be in your lease agreement, but in general the following items should be flagged by the tenant as areas which can be negotiated:
- The commercial lease rate, term and renewal options (this is more negotiable in a marketplace with more supply than demand)
- The portion (if any) of operational costs paid (e.g. taxes, fees and maintenance costs)
- Leasehold Improvements (what’s included and terms surrounding any repayment)
- Additional items that you may or may not want aside from the lease (e.g. parking stalls, garbage pick-up, janitorial services)
- Who is responsible for which types of repairs
- Co-Tenancy and Exclusive Use Clauses
- Any clauses surrounding increases in rent
It is highly recommended that tenants get legal advice or hire a commercial real estate agent to review their commercial lease agreement for any potential issues that may arise.
Do I Need a Lawyer to Lease Commercial Space?
No, you do not require a lawyer to lease a rent commercial space . A commercial lease is a written agreement between a landlord and tenant that is similar to renting a home. It allows the tenant to rent the space for a certain dollar amount per month, for a specified amount of time. When weighing the pros and cons of including a lawyer to your commercial leasing needs there are a few things to consider:
- Can you read EVERY. SINGLE. WORD. of the entire lease and understand what it means?
- Are you protected from fluctuations in rates?
- How are you protected when it comes to your landlord leasing to competitors?
- Who is responsible for repairs?
- What are the conditions surrounding subleases?
You wouldn’t want to be locked into a five-year lease and two years in have a direct competitor move in right next-door.
Take the time to understand what is included in your lease. Go through it carefully on your own, then with your team of professionals (lawyer, accountant, commercial real estate agent etc.).
What Can I Expect in a Typical Commercial Lease Agreement?
A typical commercial lease agreement includes the overall terms and conditions of renting an office or commercial space. Typical lease agreements will include the following:
- Leasing costs, usually calculated as a cost by square footage
- Leasing size, and what’s included in your leasing space e.g. common areas
- The leasing term, usually month-to-month, annual or multi-year
- Any additional costs included or not included in your lease e.g. taxes, utilities, maintenance costs, janitorial services etc.
- Terms for terminating the rental agreement by both parties
- Terms for rental increases, lease renewals and subletting
- What happens if the building is destroyed or condemned
- What happens if a major tenant who attracts business to the building leaves (usually used in retail spaces such as shopping centres)
Much of the time, commercial lease agreements are created to benefit the landlord rather than the tenant. For this reason, it is important that the tenant reviews the agreement closely for negotiation terms. It is also recommended that a tenant seeks the help of a real estate lawyer or a commercial real estate agent who has experience in drafting and negotiating these types of lease agreements.
How to Ensure Office Space Will Meet Your Businesses Needs
Whether you are a large established company, or a small company on the brink of rapid growth, before entering into a commercial lease agreement it is important to ensure that the space will not only meet your needs today, but into the future. Furthermore, if your businesses growth is still relatively unpredictable, having flexibility built into your agreement can help avoid headaches later.
Here are some important business factors to consider when signing a commercial lease:
- Ensure the space has the right amount of square footage to meet your needs now and in the future
- Ensure you are happy with the term – commercial leases can be month-to-month or for more than three years
- Ensure you are happy with the term you are being offered, and if not, negotiate the term to better suit your needs
- Pay close attention to the costs, specifically what is included in the lease, any renewal terms and abilities for the landlord to raise the rent with or without notice
- Do you have the ability to make improvements as needed? Called Leasehold Improvements, these are improvements to the space that can be removed when a tenant leaves the premises. Ensure any leasehold improvements are specifically included in your lease, as well as any special payment terms (e.g. a lease decrease in exchange for certain improvements)
- Insurance details – what is included in your landlord’s insurance? What kind of insurance is your business required to hold to protect your items and the space while you rent it?
- Other items, such as nearby amenities, signage, building rules, what happens if the building is destroyed or condemned
What Types of Office Spaces are Available in Calgary?
Now that you have a better understanding of commercial leases and the overall leasing process, it’s time to find the perfect office space for your business in Calgary.
Calgary’s downtown and surrounding areas offer a unique variety of office space, with more than 40 million square feet of commercial real estate available and new buildings always coming to market. There are 15 buildings downtown with more than 100,000 square feet available, and five new office buildings completed construction in the area in 2016 alone.
In addition to these, the city has long converted old residential bungalows into character office spaces both right downtown and in the nearby suburbs. Whether you’re looking for a small space in one of the city’s skyscrapers in the core, or an older character building in one of the nearby suburbs, there is commercial office space for every type of business.
Calgary’s bustling downtown core is divided into five districts:
In addition, there are four nearby suburban districts, all of which have either walking access or transit access to the downtown core:
Businesses looking for office space within Calgary can do so easily using the office space locator tool, which helps users find space by size, district, type, amenities and more.
What Resources are Available to Find Information About Calgary’s Commercial Real Estate Industry?
Since Calgary’s downtown office space is such an active marketplace, there are many resources for tenants looking for more information about leasing or subleasing in the downtown and surrounding areas. Below are some of the top free resources available about commercial real estate in downtown Calgary:
Calgary Economic Development: Information on Calgary’s economy, office real estate market, industrial market, available space, commercial mortgage rates and more.
CBRE: Excellent resource on Calgary’s Commercial Real Estate market
Bedrock’s Office Locator Tool: Helps tenants find space by size, district, type, amenities and more
Canada Business Network: Information on signing a commercial lease
How Do Commercial Real Estate Brokers Help?
Looking for office space, visiting available properties, and negotiating with landlords is a timely process. Many businesses choose to utilize a commercial real estate broker to aid in these transactions. A good commercial broker will be able to help you identify what type of office space would best suit your business needs, and can narrow your property viewings down to a small handful. Not to mention their abilities to negotiate the best commercial lease on your behalf while you can focus on managing your own business.
There are many benefits to using a commercial real estate broker, including:
- Their extreme familiarity with the current real estate market, including lease, renewal and sublease opportunities, enable them to effectively negotiate on a tenant’s behalf
- Their established relationships with key industry players can help get tenants the best space for the best price
- Their detailed knowledge of the process of purchasing land and infrastructure, including legal requirements, making offers and writing/reviewing documents related to purchase.
Representation from a commercial real estate broker is essential to ensuring a successful purchase and avoiding legal difficulties by choosing to purchase without the assistance of a broker.
Calgary has hundreds of active commercial real estate brokers working for dozens of commercial leasing companies in the city. While there is no one up-to-date directory to find agents, there are a few ways you can find a broker:
How to Choose a Commercial Real Estate Broker
So, how do you know which commercial real estate broker to choose? Their answers to the following questions will enable you to make the best decision:
- How long have they been in the industry?
Like any industry, the more experience a realtor has, the better service they will generally be able to provide.
- Are they looking out for your best interests?
Many Calgary real estate brokerages earn a majority of their income through listing landlord’s properties, so their focus is generally on finding tenants for their listings, not necessarily finding tenants the best deal. Be sure to find a broker who will work to get you the best deal, rather than work for themselves or a landlord. Independent commercial real estate brokers that focus on representing tenants rather than listing properties with landlords are often the most likely to focus on your best interests.
- Have they come recommended?
Asking your friends and colleagues who they recommend is always a great place to start when looking for a commercial real estate agent. You can also search LinkedIn, Google Reviews and Facebook Page reviews to see other user’s experiences with a broker, and to see if they fit with your real estate needs.
Like anything else, it pays to do your research. Take your time when choosing your realtor and don’t be afraid to ask the tough questions to ensure you are being fairly represented in the Calgary commercial real estate market.
Our team at Bedrock Realty Advisors Inc. been helping businesses of all types and sizes find and negotiate their perfect office space since 2003, establishing the company as one of the top performing commercial brokers in the field.
We have put together this Commercial Leasing Guide to help provide those seeking office space with informational and unbiased information on leasing office space in Calgary. From negotiating commercial leases to choosing the right broker for you, we hope this guide will make your next lease, renewal or subleasing experience in our city a smooth one.