If you're a business owner who owns the commercial space your business operates in, you're also a real estate investor, even if you've never really thought of yourself that way. And if you've come to realize that you're operating in a space larger than what you really need, you've just been presented with an interesting opportunity.
The most obvious reason to lease out part of your space is of course for the rent money doing so would provide. And while there's no doubt that alone could add considerably to your bottom line, you stand to gain much more if you choose your new tenant carefully.
Finding your match
Bringing in a highly compatible business could give your own business a boost in a variety of ways beyond simply helping to pay the bills. If you and your tenant share a similar customer base, each business can serve as a draw for the other. Giving customers more than one reason to visit your location can be especially valuable if your business space isn't part of a shopping center with a large anchor store drawing them in.
The possibilities for great business combos are endless. If you're having trouble thinking of other business types that would mesh well with yours, think about what your collective customers have in common and go from there.
For Johnny Taylor, owner of Smokehouse Meat Market in Macclenny, Florida, his customers love great food. So leasing out a portion of his store space to a takeout restaurant makes sense. The restaurant owner pays him rent and her portion of the utility costs, and he gives her a deep discount on his meats, including local farm-to-table offerings, which the restaurant includes in their menu items. The two businesses also team up for catering jobs.
Taylor says: "When I get an opportunity to help her, her foot traffic grows. And every time someone who's never heard of our store comes into the restaurant to get lunch or dinner to carry home, they see us and what we have to offer and many come back. It's a partnership that works well for both of us."
Getting it in writing
As with any lease agreement, there are legal issues to consider before renting out part of your business space. Consulting a real estate attorney for help drawing up a lease is always a good idea, but to get you started, here's what attorney David Reischer suggests including:
- The rent amount and due date.
- Any shared use of internet access, office equipment, parking spaces, or any other shared resources.
- When and how the tenant can access the space. Full access with a set of keys is generally the simplest arrangement. Anything different will need to be broken down in detail.
Reischer says it's also critical to review and understand the regulations of the local jurisdiction. "Specifically, make sure to learn of any tenant rights, landlord obligations, and safety rules, and make sure the new tenant is notified in writing of all their legal obligations," he says.
But what if you lease rather than own your business space? Can you sublease part of that space to another business?
Reischer says sometimes you can, adding: "Be sure to check the existing lease contract to make sure it's not explicitly forbidden to sublet any unused portion of the space to a third party. If the contract is silent on the issue, then it still may be a good idea to speak with your existing landlord and make sure it's not going to be a problem to sublet."
The Millionacres bottom line
If you own the commercial space that houses your business or lease it from an agreeable landlord and have room to spare, leasing that space to another business could be a lucrative opportunity. But you may want to avoid simply leasing it out to the first business that comes along. Finding the right match could lead to a partnership with immeasurable benefits, whether you and your tenant go together like Fred and Ginger or in more surprising ways, like Martha Stewart and Snoop Dogg.