Understanding the Commercial Lease Transaction Process: A Step-by-Step Guide

Leasing commercial real estate can be one of the most significant decisions a business makes — whether you’re opening your first storefront, relocating your office, or expanding your industrial footprint. While the process may seem complex, understanding the main steps can make it far less intimidating and help you make confident, informed decisions.

Here’s a clear look at what to expect throughout the commercial lease transaction process.

1. Defining Your Needs

Before you start touring properties, it’s essential to define your business requirements. Ask yourself questions like:

• How much space do I need today — and in the future?

• What type of property best supports my business (office, retail, industrial, medical)?

• What’s my ideal location and budget range?

A commercial real estate broker can help you refine these needs, align them with market availability, and ensure your goals are realistic given current market conditions.

2. Exploring the Market & Touring Properties

Once your criteria are clear, your broker will conduct a market search to identify spaces that fit your needs. From there, you’ll tour properties to evaluate factors such as:

• Building condition and layout flexibility

• Tenant mix and visibility

• Access, parking, and surrounding amenities

• Overall feel and functionality for your team or customers

These tours help narrow down your top options and prepare for the next step — submitting proposals.

3. Submitting & Negotiating a Letter of Intent (LOI)

The Letter of Intent (LOI) is a non-binding document that outlines the main business terms of your potential lease. It typically includes:

• Lease term and rental rate

• Tenant improvement (TI) allowance

• Free rent or concessions

• Renewal or expansion options

• Security deposit requirements

This stage allows both tenant and landlord to align on major terms before moving into the formal lease process. Your broker’s market expertise plays a key role here — helping you negotiate competitive terms while maintaining a strong relationship with the landlord.

4. Lease Drafting & Legal Review

Once the LOI is signed, the landlord’s attorney will draft the formal lease agreement. This is where the details come to life — and where professional guidance truly matters. The lease will outline all operational responsibilities, including:

• Who maintains HVAC, roof, and structure

• Rent escalations and CAM (Common Area Maintenance) costs

• Insurance and indemnity clauses

• Sublease or assignment rights

Both parties, along with their attorneys and brokers, will carefully review and negotiate the document until all terms are mutually agreed upon.

5. Lease Execution & Move-In Preparation

After final review, both sides sign the lease — officially locking in the agreement. At this point, deposits and insurance certificates are submitted, and the focus shifts to move-in readiness:

• Construction or tenant improvements begin

• Utilities and logistics are coordinated

• Final walkthroughs are completed

Your broker will typically remain involved to ensure a smooth handoff and timely occupancy.

6. Ongoing Support After Move-In

A great brokerage relationship doesn’t end when the ink dries. Your broker should continue to be a long-term resource — tracking renewal dates, monitoring market conditions, and supporting future growth or expansion needs.

Final Thoughts

Commercial lease transactions are multifaceted, but with the right guidance, they don’t have to be overwhelming.Working with an experienced commercial real estate broker ensures that every phase — from space search to signed lease — is handled strategically and efficiently.

Whether you’re a tenant, investor, or landlord, understanding the process empowers you to make smarter decisions that align with your goals.

Written by LevRose CRE with assistance from: LevRoseCRE.(2024)

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