Phase 5: Signing a Lease

What I really mean to say is this:  Phase 5 is about investigating whether or not a warehouse is right for you or not.   So most likely, you will get to this stage several times and revert back to Phase 4 as you don’t work out a deal for one reason or another on a warehouse.  Also assume that you are going to start forking out cash for answers when looking at warehouses.  Architects fees, contractor fees, engineering fees, code review fees, etc.  The more you examine a space, the more you fork over.  Anyhow, I will assume that you find a space you eventually lease for this part of things.

  1. Lets assume you have found a space:  Big if here, as it will take some time.  I know first hand that 33 Acres feel super fortunate to have their space, and I know of a few others that feel the same way.  Remember, you can have a good landlord, a good space or a good lease rate, but you can only have one of these things.  Which would you pick?  If you want a prime location like we did, you are going to need to pass on the other things.
  2. Preliminary code Review:  Get your architect to do a preliminary code review to understand what aspects of the brewery you will need to upgrade when putting in a brewery.  As I indicated previously the important items are:  Electrical (4ooamps minimum for a 20 HL brewhouse), plumbing, sprinklers, seismic upgrades, water upgrade, sanitary sewer.  If you need to change these things down the road, just know that each of these items can come with a huge bill.  An electrical upgrade in our space is about $40,000 and up, and a seismic and sprinkler upgrade can be even more than this.
  3. Know the locations and code:  Some areas allow outright brewing and others require an application to the City.  For us, we picked an area where brewing was conditional so we had to submit a Development Permit to be able to brew beer in this space.  It takes about 90 days to get approval and will require the work of an architect.  Brewing is only an outright use in M2, so start with these areas, but as you will quickly find, there isn’t a lot of M2 in the city.  It is in these areas that you seem to start to make educated guesses at outcomes of properties.
  4. Get your Contractor into the Space to give you a real world opinion:  Sometimes, you can guess the cost of things, and at other times you need the help of someone who has experience with these things on a daily basis.  A contractor can help you figure out what the actual cost of something can be.  This is another reason that you should use someone who is focused on your project, but also has experience in dealing with other breweries.  That way they should know what the heck goes on and when.
  5. Go talk with the City of Vancouver:  Make sure you have done this in the past so that you know what some of the basic things they are going to ask you.  So you go to City Hall, you go to the inquiries desk and get in line to speak with a specialist who will help you understand how the space relates to your use.  They will look at things about the zone and building you are in, and remind of what may or may not need to be done.  They talk about retail areas, your use, parking requirement, sprinklers, etc.  This is by no means a deep dive into things, but they will help you make sure there are no obvious issues missed.
  6. Getting your Ducks in a row:  So getting the opinion of your professional team, and finding out the information you need about how your business will work can take a bit of time.  For us it took about 2 weeks to get the information we needed, and this is where you need luck on your side.  If your landlord finds someone else with an established business, that fits the space better than you, say bye-bye to any sort of chance you have.  So the lesson here is to act quickly on a space that you find.  It is also why kissing a few frogs makes you know when you see a space that could work really well for you.
  7. Make your Offer:  So once you figure your space is a good option, make the offer.  We found that unlike residential real estate where there is a lot of negotiating back and forth, in commercial real estate, it is less emotional and a lot quicker in terms of negotiations.  In your offer, you will have subjects and these will provide you a chance to delve even deeper into understanding your space.  We made our offer subject to a few things, allowing us to get more answers before we would decide if we wanted to move forward or not.  Expect a personal guarantee, and expect to pay the full lease rate if you want any landlord sponsored work completed at the brewery.
  8. Conditional Period:  If you do get your offer accepted, you will have a conditional period where you figure out many of the details on things.  Expect the money to start rolling out, and expect things to go from a passing interest in starting a brewery, to very real.  You will need to have some money, you will have your personal finances looked at, you will start taking on risk and you will start needing to make decisions …. very important ones that will effect your business way into the future.  Our conditional period allowed us to apply for a development permit, so we could know if we were able to brew beer in this space.  I have written about the process of applying for a development permit, so look for more detail there if you like.
  9. Back to the Start:  I would encourage you to go back to the back to the start of this process if you seem to crossing a lot of obstacles.  Know this:  You will always be able to find an answer, as there is virtually no problem in a space that you can’t throw a bunch of money at to fix.  OK, maybe permits is not something you could change, but everything else for sure.  So if you get to this point, and it seems like there are an onerous amount of things to do, back away, take a loss and move onto the next space.  Just know that your realtor, your architect, your partner and your own inner voice may all tell you to go for it.  They want to see you get a space so they can get deal, get to work and get going with things.  However, you will be the one paying and working through the problems, so make sure you are comfortable with what you are getting yourself into.  When in doubt, contact me and I can offer some arms length advice on what to do.
  10. Remove Conditions and Go Firm:  This can be one of the greatest days of the process, and also one of the most nerve racking:  The day your remove conditions and have a firm lease.  You have jumped through hurdles, put your personal wealth on the line, learned about the  space, determined how your business will operate in the space (nano versus micro), answered questions on things you never thought you would learn about, spent lots of money in the hopes that things will work out, and spent thousands of hours to reach this day.  Celebrate, you have a space!  It is also the day that things “just got real”.  To make a deal go firm, you are writing a big cheque to the landlord, and starting the real work of starting a brewery.
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