Things to Consider Before Leasing a Commercial Property
Commercial real estate is property that is used solely for business purposes. You can buy commercial real estate, but many prefer to lease the property. For example, restaurants or retail stores may lease space for their business in a shopping center. Other businesses might need to lease space for offices or warehouse space to store inventory. Let’s talk about things to consider before leasing a commercial property.
Office space is one of the four subcategories that make up the broad definition of commercial real estate. Office space widely encompasses building space from skyscrapers to smaller office parks. Rentals could include the entire building, one floor, or even one single room. Office space for rent has become very diversified, especially during the pandemic health crisis. Office space needs are constantly changing and looking for ways to be more flexible. Employers and employees are looking through an array of options to find just the right one to suit their business needs. Office space rentals are very Covid-19 savvy today and continue to adapt to changing space needs to give employers alternatives to keep their businesses operating successfully, even in these hard times.
COMMERCIAL PROPERTY LEASE
Things to consider before leasing a commercial property include not only needing to have the right space in the right location, but you also need to have the right lease. Leasing space may not be as expensive as buying a commercial property outright, but unless you have the right lease, it could still have a significant financial effect on your bottom line. Let’s consider four types: the full-service lease, the net lease, the modified net lease, and the percentage lease.
Full-service lease. In this scenario, the landlord covers most of the expenses, such as maintenance costs, property insurance, and property taxes. The tenant pays just a fixed rent amount. The cost of utilities and who pays them can vary. This type of lease, also known as a gross lease (because it covers most everything), will typically be at a higher rent rate.
Net lease. In this lease option, the tenant and the landlord split the expenses. Net leases come in several types with differing associated responsibilities. Three versions are the single, the double, and the triple net lease. With the single option, the tenant pays a fixed rent, but also pays the property taxes. With a double, tenants pay property taxes, property insurance, and a fixed rent rate. With a triple, the tenant pays property taxes, property insurance, and maintenance costs, plus a fixed rent rate. The rent rate in this type of lease is usually lower since the tenant is covering so many of the other costs.
Modified net lease. This lease option is somewhere in the middle between a full-serve lease and a net lease in that both the tenant and landlord agree to split the costs. This lease is pretty flexible; therefore, it is a popular type of lease. It can be adapted to many situations. However, as is the case with all leases, you will need to carefully read the lease, along with any fine print, to make sure you know exactly what you’re signing.
Percentage lease. With this type of lease option, tenants pay a fixed rent rate plus a percentage of their gross income. This may sound questionable, but this is a popular lease option with restaurant and retail industries because it can lower their rent during their slower periods. It is uniquely adjustable in that way.
Office Evolution has more than 70 locations open, 140 units sold in markets across the country and is poised for further growth as the demand for affordable and safe, workspace close-to-home continues to rise.