Leasing or Buying Commercial Space in Edmonton: What I Look at Before My Client Commits

Finding commercial space is relatively easy. Determining whether that space will actually work for the business can be much harder.

Price, location and lease terms matter, but they don't tell the whole story. Before my client commits to a commercial property, I want to understand what the business intends to do in the space, whether the property can support it, what may need to change and which issues should be addressed in the offer or lease.

My background in architecture, construction and project management influences how I approach commercial real estate. I tend to look beyond the listing itself at function, flow, measurements, building systems and the practical details of getting a business into the space.

1. Start With What the Business Actually Needs

Two businesses looking for 2,000 square feet may need completely different properties.

I want to understand how customers enter and move through the space, where employees work, how products arrive, what needs to be stored, what equipment will be used and what services that equipment requires.

For some businesses, the important issue may be parking or visibility. For another it could be loading, ceiling height, electrical capacity, ventilation, plumbing, gas or drainage.

A space can look right during a showing and still be wrong once you understand how the business actually needs to function.

2. Can the Business Actually Operate There?

This is one of the first things I want investigated.

The City of Edmonton requires zoning approval when starting a new business, relocating one or changing business activities. Importantly, the City specifically encourages business owners to investigate zoning before signing a lease, or to make the lease conditional on obtaining the necessary approval.

And zoning isn't necessarily the end of the investigation.

Changing a space from one use to another, such as retail to restaurant, can trigger development and building requirements. Changes to washrooms, walls, ventilation, plumbing, gas, electrical systems, life-safety systems and commercial equipment can also require permits.

That's why I don't want to know only:

“Is commercial use allowed here?”

I want to know:

“Can this particular business operate here the way the client intends to operate it?”

3. How Much Space Are You Actually Getting?

Commercial square footage deserves more attention than it often receives.

There can be a difference between the area a tenant physically occupies and the rentable area used to calculate rent. Depending on the building and lease structure, a tenant may also carry a proportionate share of common areas.

I have experience working with architectural drawings and property-measurement technologies including laser scanning, iGUIDE and Matterport. That makes me particularly interested in the relationship between the advertised area, the physical premises and how the space is being used.

I'm not suggesting every commercial listing needs to be remeasured. But when square footage materially affects rent or value, I want to understand what the stated area represents and what my client is actually paying for.

4. Don't Just Ask Whether a Building Has a Service

This is where commercial properties can become complicated quickly.

Suppose a business requires natural gas.

Knowing that the building has gas doesn't necessarily tell us whether the client's premises have the service they require.

Where is the existing line? Can it be extended into the unit? Is there sufficient capacity? What route would it take? Does the work affect another tenant or common area? Does it require a building penetration? Will the landlord permit it? Who performs the work? Who pays for it?

The same thought process can apply to:

electrical capacity, plumbing, drainage, HVAC, ventilation, make-up air, exhaust, water and telecommunications.

These aren't questions I pretend to answer as an engineer or contractor. My job is to recognize the issue early enough that the appropriate professional can answer it before my client discovers it after committing to the space.

5. Building Penetrations Can Matter More Than They Sound

Restaurants, bakeries, medical uses, industrial operations and many other businesses may need equipment or services that affect the building itself.

An exhaust hood might require roof or wall penetrations. New HVAC equipment may require rooftop placement. Plumbing may need to cross floors or common areas. Signage can involve the exterior envelope.

Edmonton identifies changes to roofs, exterior walls, HVAC, plumbing, gas and electrical systems among commercial alterations that can require permits.

From the real-estate side, I also want to know what the landlord will allow.

Something being technically possible doesn't automatically mean the tenant has permission to do it.

That distinction can become an important part of the negotiation.

6. Look at Function and Flow Before Designing Around the Problem

One of the advantages of my architectural background is that I naturally look at how spaces function.

Where does the customer enter?

Where does the lineup form?

Where are employees working?

Where is storage?

How do deliveries reach the business?

Where does waste leave?

Can equipment actually get into the building?

Are washrooms in the right place?

Does the layout force the business to spend money solving a problem another property doesn't have?

Sometimes the cheapest solution is not negotiating another dollar off the rent. It's choosing a space that requires less work to become functional.

7. Understand What Is Shared

Commercial properties frequently involve shared components that aren't obvious during a quick showing.

Depending on the property, that can include parking, loading areas, garbage facilities, entrances, corridors, mechanical systems, washrooms or other common areas.

I also want to understand what portion of those common areas, if any, affects the tenant's rentable area or occupancy costs.

The question isn't simply:

“How big is the unit?”

It's:

“What does my client exclusively occupy, what is shared, and what are they paying for?”

8. Who Is Going to Make the Space Work?

Once we've identified what needs to change, the next question becomes:

Who is responsible for it?

This is where property analysis turns into negotiation.

A commercial transaction may involve landlord work, tenant work, tenant-improvement allowances, service upgrades, fixturing periods, rent commencement dates and approvals for alterations.

If a gas line needs to be brought to the unit, for example, there may be an opportunity to negotiate the cost or have the landlord complete or contribute toward the work.

The same principle can apply to electrical upgrades, HVAC, washrooms, walls, doors or other improvements.

I would rather identify those requirements while we still have negotiating leverage than after the agreement is unconditional.

9. Financing Can Affect How the Deal Should Be Structured

Commercial financing can be very different from buying a home.

Before writing an offer, I want to understand how the client intends to fund the acquisition or improvements because financing requirements can influence conditions, timing and even how a transaction should be structured.

There are also programs business owners may not initially know about. The federal Canada Small Business Financing Program, for example, can support eligible commercial real property, equipment and leasehold improvements. The current program allows up to $1 million in term financing, subject to category limits, with the financial institution making the actual lending decision.

That's particularly relevant when leasing a space requiring substantial improvements. The federal program specifically recognizes leasehold improvements such as walls, partitions and integral heating or air-conditioning equipment as potentially eligible expenditures.

But financing needs to be investigated early. The fact that a program exists doesn't mean a particular borrower or transaction will qualify.

10. Sometimes the Solution Is in the Structure of the Deal

Negotiation isn't always about convincing someone to accept a lower price.

Sometimes there's a gap between what a buyer can finance and what a seller wants.

With a business acquisition, for example, vendor financing or a vendor take-back (VTB) can sometimes form part of the solution. In a VTB, the seller effectively finances a portion of the purchase price. BDC specifically identifies vendor financing as a potential way to bridge an acquisition funding gap and potentially facilitate other financing.

It won't work in every transaction, and the lender, accountant and lawyers need to be involved where appropriate.

But it illustrates something important about how I negotiate:

Price is only one variable in a deal.

Terms, timing, improvements, financing, conditions and allocation of responsibilities can sometimes be just as important.

11. Pay Attention to Guarantees and Indemnities

A corporation signing a commercial lease doesn't necessarily mean the business owner has limited their personal exposure.

A landlord may request a personal guarantee or indemnity, particularly with a new business or corporation without an established financial history. Business lenders may also require guarantees depending on the financing.

This is an area where legal advice is important, but from a negotiation perspective I don't want a client overlooking the issue because all their attention is on rent.

If a guarantee or indemnity is requested, questions can include its amount, duration, scope and whether any limitation can be negotiated.

The objective isn't for the REALTOR® to replace the lawyer. It's to recognize the issue early enough that it can be properly reviewed and, where appropriate, negotiated.

12. Find the Problems While You Still Have Options

Commercial due diligence isn't about trying to become the architect, engineer, contractor, lawyer, lender or municipal planner.

It's about knowing when we need one.

If I identify a question about gas capacity, I want the appropriate contractor or engineer involved.

If there's uncertainty about permitted use, I want it confirmed with the City.

If the lease contains legal obligations or guarantees, I want the client's lawyer reviewing them.

If financing affects the transaction, I want the lender involved before the conditions expire.

The City of Edmonton itself warns that businesses can discover renovations are required even when they weren't originally planning them.

Finding that out before commitment gives us options.

Finding it out afterward gives us a problem.

A Commercial Space Has to Work Beyond the Listing

A property can have the right location, attractive rent and a motivated landlord and still be the wrong space.

When I'm helping a client lease or buy commercial property, I'm looking beyond the advertised terms at how the business will function, what the space actually includes, what services and improvements may be required, and which issues should be resolved or negotiated before the client commits.

My background in architecture, construction, project management and real estate gives me a different lens when evaluating those details.

And when an issue appears, the objective isn't simply to point it out.

It's to determine whether we can solve it, price it, protect against it or negotiate around it.

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