Leasing your first commercial space is exciting—but it’s also where many new tenants make costly mistakes. From underestimating build-out costs to signing leases they don’t fully understand, these missteps can drain capital and delay opening day.
At JR Mercantile Real Estate Advisors, we see the same issues come up again and again. Here are the top five mistakes first-time commercial tenants make—and how to avoid them.
1. Grossly Underestimating Build-Out Costs
This is the biggest one.
Many tenants assume a space just needs “a little work.” In reality, even light improvements—electrical, plumbing, HVAC, walls, flooring, fire separation—add up fast. Costs can easily hit $50–$200+ per square foot, depending on use and condition.
Fix:
Bring in a contractor early. A qualified contractor can:
- Review the space before you submit an offer
- Flag hidden costs
- Provide realistic budget ranges
- Help assess whether landlord improvement allowances are adequate
Waiting until after lease signing is how budgets get blown.
2. Ignoring Professional Fees (Lawyers, Consultants, Designers)
Lease agreements are legal contracts—complex ones. Yet many new tenants skip legal review to “save money.”
That’s a mistake.
Commercial lease reviews typically cost $1,500–$4,000, and that fee is nothing compared to the cost of signing:
- Uncapped operating expenses
- Bad renewal clauses
- Personal guarantees you didn’t expect
- Restrictive use clauses
Fix:
Always have a commercial real estate lawyer review the lease. Period.
Depending on your business, you may also need:
- Designers
- Engineers
- Permit consultants
These are not optional expenses—they’re part of doing it right.
3. Choosing Space Before Understanding Zoning & Use
Tenants often fall in love with a space before confirming whether their business is actually allowed to operate there.
Common issues:
- Zoning doesn’t permit your use
- Venting isn’t allowed
- Food or medical uses are restricted
- Parking requirements aren’t met
Fix:
Confirm zoning, permitted use, venting, and licensing requirements before submitting an offer. This should be done with your broker—not after the fact.
4. Focusing Only on Rent Instead of Total Occupancy Cost
Cheap rent doesn’t mean cheap space.
New tenants often ignore:
- Operating costs (CAM, taxes, insurance)
- Utilities
- Snow removal, garbage, maintenance
- Escalations over time
A space with lower base rent but high operating costs can end up costing more monthly than a higher-rent, more efficient option.
Fix:
Evaluate total occupancy cost, not just the face rent. This gives you a real picture of affordability and cash flow.
5. Going Direct to the Landlord Without Representation
Many first-time tenants think using a broker will cost them extra. In most cases, tenant representation is paid by the landlord, not the tenant.
Going in unrepresented means:
- No leverage in negotiations
- No guidance on market terms
- No one flagging red flags in the deal
- Higher risk of overpaying or accepting poor lease terms
Fix:
Work with a tenant-focused commercial brokerage that understands your business model and long-term goals.
Final Thoughts
Your first commercial lease can either set your business up for success—or create years of unnecessary stress and financial pressure.
The right planning, the right professionals, and the right advice make all the difference.
If you’re considering your first commercial space, JR Mercantile Real Estate Advisors helps tenants navigate site selection, budgeting, negotiations, and lease structure—so there are no surprises after the ink dries.
Thinking about leasing your first space? Reach out before you sign anything.
