Hi Vinay, I'll do my best here because it looks like no one else is jumping in. I am in the Minneapolis/St. Paul market so this may not all apply, but I can give you a general opinion from a broker and landlord's perspective.
1) I wanted to know if I need a real estate agent to negotiate on my behalf.
This depends a bit on the complexity of the deal. If you are leasing 1000 square feet of office at $10/ft gross you will probably be fine on your own. It sounds like this isn't the case however so you will likely be much better served with an agent working on your behalf and explaining what is happening. I am helping a friend lease a 2000 square foot space and we were able to get them $110k from the LL. Definitely worth it in this instance.
2) I also learnt that the if I get a real estate agent to negotiate my lease, they get paid by the landlord. Is that the case in CA?
Not 100% sure on this being the case in CA, but there is an expectation of there being a protocol for cooperating brokers in our market in MN. Usually if there is a listing broker involved a large part of their compensation goes towards your agent so you typically aren't adding much of a line item expense to LL.
3) For the building to be approved for licensing, we need to split the bathroom in the front office into 2 and add a door in the first office into the new bathroom. Since this is a value add to the property and it is a fairly short lease (3yr lease + 3 yr renewal option), we would like the owner to make these improvements before the start of the lease. Is this a normal ask as a potential tenant?
This is an item usually negotiated in the LOI and would depend on many factors. It is not unreasonable to ask in general but lease amount, demand for this type of space in your area and the LL's ability to come up with the capital could all affect this.
4) It's NNN lease. Does that mean if the roof falls apart, is the tenant liable to fix it or is it usual to have caps on capital expenditure and can I ask the landlord's agent to have a cap? If so what's a typical cap amount if there is one?
All of this is typically lease dependent and would be negotiated during the LOI and lease drafting phase.
5) What are the sublet terms generally in commercial leasing?
Depends on the strength of the tenant, asset type (retail, industrial etc.) and LL preference, but generally I would say allowable with LL approval would be the standard. As a LL myself I wouldn't ever give my tenant the right to encumber my property without my direct involvement.
6) What is an exit strategy? i.e if we close the business say in 2 years or the business doesn't get licensed in the first 3 months? Do we need a clause? Is that the norm?
I would be very hesitant as a LL to place you as a tenant if you are asking me what happens in the event you close down your business. Typically a LL will require a personal or corporate guarantee that keeps you on the hook for the duration of the lease regardless of any other circumstances, especially if they are putting money into the building. You should work with an attorney to make sure language is included ensuring that you are able to get your licensing however and as a LL, I would work with you there, but would ask that you start the process ASAP.
7) Is it reasonable to ask the landlord to fix the damaged floor in the back room?
Usually I would say it is, but there are always variables and extenuating circumstances as previously alluded to.
8) Is it the norm for the landlord to put a fresh coat of paint inside?
Haha sometimes. A lot of these questions are structured a bit differently in commercial RE as the LL will usually negotiate some sort of tenant improvement allowance (TIA) expressed as $/ft. Rough numbers in Twin Cities for retail/office are about $5/ft per year of lease being signed. This changes when the lease rate is higher or lower than average though.
A lot of this is very general and not the most helpful, but I hope illustrates the benefit you will receive by using a competent broker and attorney to get this done. Again if this is a cheap little deal, I think people can get away with it on their own, but if its of substance you will want some professional guidance. The types of companies that use brokers would help make the case that this is something you want to emulate. A lot of the larger residential brokers even use them.
This is not the same as negotiating a lease for where you live and shouldn't be treated as such or you risk getting crushed in the negotiation phase. Best of luck and hope something in here was helpful.
