Preparing For The Warehouse & Industrial Leasing Process In Arizona
Understanding The Ins & Outs Of Industrial Warehouse Leasing
Finding the right warehouse or industrial space for your company is an important decision that will affect many facets of your business. The process can be complicated, competitive, and intense, so you will want to work with an experienced Arizona commercial real estate attorney who knows the ins and outs of the industry and can help you get a lease that will work well for your business while also avoiding risk and unexpected expenses in the future.
Before you begin your search for the perfect facility, learn more about the process and gain an understanding of the industrial warehouse leasing process in Arizona.
The Basics Of Lease Terms & Due Diligence
In Arizona, most commercial leases are triple net leases, which means that the tenant will pay an agreed-upon lease amount, and then separately pay an amount for taxes, insurance, utilities, and maintenance for the building. Typically, leases will require terms of at least 3-5 years in length. This is a reflection of the popularity of warehouse net leases in the Phoenix area as well as the high upfront cost of building a warehouse facility.
Determining who covers the cost of the buildout is commonly part of the contract negotiation. Companies who are looking for warehouse space in places where facilities are in high demand may need to prepare to cover a large percentage of the buildout costs themselves in order to make their offer more competitive. This highlights why due diligence and discussing the terms with your Arizona business attorney before signing a lease is extremely important.
You’ll want to get clear documentation on every expense associated with operating the facility, including utility bills for the past year or more, routine maintenance costs, and insurance information. In most situations, the warehouse landlord will have this documentation prepared for you, but it’s vital that you accurately and completely understand the projected costs beyond the base lease payment.
Arizona’s Standards For Breach Of Contract
An important negotiating term of Arizona warehouse leases is determining what constitutes a breach of contract. Potential breach situations are typically divided into more and less severe breaches to help landlords determine the appropriate response. For breaches that are considered to be fairly minor, the tenant will often be required to resolve the situation and establish practices that will prevent the violation from happening again in the future. For serious breaches of contract, termination and eviction are the typical response.
It’s critical for tenant companies to understand what constitutes a breach of a lease agreement. Your Arizona business attorney can help you establish practices that will help avoid those situations and establish insurance coverage to reduce risk.
Reaching a Workable Agreement For Your Business
Prior to signing a lease agreement, you should review all details of the lease agreement with your potential warehouse landlord, your company’s executives, and your Arizona commercial real estate attorney. Additionally, this significant decision should include feedback from any experts you have hired to represent your company. Carefully consider the costs, benefits, risks, and other market options to verify that this lease agreement makes good sense for your company.
Before moving forward, your company should also collect and review the following information:
- Review building blueprints to make sure the facility meets your needs
- Detail any previous construction that took place on the facility
- Understand routine maintenance for the facility
- Detail all building expenses, if applicable
- Review any litigation or liens on the property
If you’re working with a qualified Arizona commercial real estate attorney and an experienced warehouse landlord, many of these concerns will be addressed in the initial conversations about the warehouse lease terms. But you’ll still want to protect your business and this large financial investment by working with a commercial real estate agent, commercial real estate attorney, and a certified inspector who has experience with industrial warehouses. In some situations, you may also need to consult with professionals, such as an industrial engineer or a general contractor, who have experience with industrial warehouse projects.
Even though it’s possible your company already has employees with many of these skills, it’s usually worthwhile to hire outside counsel during the warehouse lease process, since the lease agreement will represent a significant financial investment for your company and will have dramatic impacts on your ability to fulfill orders, create products, and grow your company. Most commercial leases contain acceleration clauses, meaning that in the event of a breach, the landlord is likely to present you with a massive bill for all the future rent and other costs over the entire life of the lease. Because of the high cost if something goes wrong, don’t allow the excitement of new growth potential to override concerns, unexpected costs, and other issues that must be fully considered before you commit to a facility.
Protect Your Company & Get a Leasing With An Arizona Commercial Real Estate Attorney
If you’re looking to lease a warehouse facility for your business, consult with Denton Peterson Dunn before agreeing to any lease terms. Our experienced team of attorneys are ready to assist you with every aspect of planning, reviewing, and preparing the best commercial lease agreement for your business so you can be fully prepared for the future. Schedule your confidential consultation today by contacting our office!