Commercial Lease - tenants perspective

Hello everybody,

Commercial lease is all brand new to me and the knowledge i've got about it is everything that has been posted on PC. I've read a few other threads on this topic and learn't quite a bit though i want to get an idea of what is a 'good result' for myself as a tenant in a commercial lease.

The situation:

I'm in the process of opening a 'functional' gym in south-west sydney. Obviously there are risks involved with any start-up business so i am a bit hesitant on going for a 5 year lease. (but i've accepted the fact that this may be the best plan for this negotiation process) A 3 year lease is preferred.

Our chosen unit (274m2) is the first unit visible (corner location) when driving in from the main street - a brand new commercial complex with approx 50 other units. (strata complex)
They are asking for $56,400 +GST (Net). Agent has said outgoings roughly $30/m2 so approx $8000.

Something to consider for the negotiation:

• There is a mezzanine which hasn't had any flooring done because the owner/s wants to know the type of tenant before they install the flooring. (being a gym, we will be using rubber mats so there will be no need for carpet/tiles etc)

(my wishlist)

• There are two bathrooms (one upstairs and one downstairs) which do not have showers. We would like to get at least one shower in.

• Mezzanine has ducted air cond already but the main warehouse area does not have ventilation. I'm thinking of installing a massive industrial 7m diameter fan to at least circulate air.

• The mezzanine is an enclosed gyprock room. I would prefer if the length of the wall facing the main gym area (approx 12m) was open so occupants of the mezzanine and look down onto the main gym floor and vice versa. Should i bring this up with the owner/s for their consideration to remove a section of the wall to a point where at least it still supports the ceiling grid?

To my knowledge from reading previous similar threads, rent reviews capped at CPI is a good outcome for myself and gross rent seems the be the better option.

Question, after going through the application for via the agencies website.
Would occupancy date refer to the date when i START my fit out? or the date when i open the doors to the completed gym? When would the rent free period start from? the date i start fitout or the date the gym actually opens its doors?

What is included as outgoings?
Agent was telling me i'm responsible for water, phone/internet, electricity? Is there anything i missed or he did not mention?
Who pays for the strata, rubbish, council, land tax etc if it was gross rent?



Any tips on what should be offered in regards to rent and the wishlist?



I would really appreciate any advice/tips.



Thank You!!
Matt

 

There's plenty to negotiate.

The aircon will struggle with the heat from exercising hot bodies

Is asking for a 3 + 2 year lease a viable option?

A gross lease makes the outgoings the lessor's responsibility except for the services that you use ie power, water/sewer, phone, garbage. Owner will pay insurance, rates, strata, council, land tax.

Lease commencement - after you achieve DA/CC. Rent free may include the fitout period or run from the 1st day of trading.

 

Yes, this would work for me but would these seem unattractive to the owner? I can always Make the offer and see what it leads to.

So I would assume that asking for rent free to commence on 1st trading day would be advantageous for me?

 

Hope this proposed site has plenty of parking ?
Will the available parking be designated (other complex workers parking out front all day).
Good luck

 

Yes there’s allocated parking. Each unit has 2 spots each but the unit I want has 8 spots (which is the most in the entire complex)

We will only be opened early mornings and in the evenings 5-9am and 5-8pm so I guess the hours our members will be onsite, the other units occupants are not around.

 

It's a starting point, it gives the owner 5 years but also an exit point (There are other ways to achieve this too).

Rent free & fitout period are two separate points. Fitout contributions are another discussion altogether.

 

*) lease term, i would be asking; 3+3+3+3 to give you plenty of options to continue or bail out
*) your fitout - i woul be much clearer in what you want, even drawing plans and do basic costing (yes, i know that's effort), but at least you know cost $ and landlord knows value you are adding (to help you negotiate rent free's or lower bonds)
*) also parking, which then leads me to Council and checking on DA requirements and useage consent (actually i would go there second, go there, don't ring em), and they will have a bunch of questions and list of demands too - economic speedhump that they are.
*) re-plumbing for a shower - ouch, that sounds expensive
*) i would visit site with the agent first - show some interest (but play cards close in the first meeting) - then as you chase up the other stuff - the agent talks with owner - and they either sweeten the deal because the are super keen to get you in, or they don't.
*) best wishes and good luck - sounds fantastic - and the world needs more fitness