Top 5 Hidden Costs to Look For Before Signing Your Office Lease

know what your office space costs areToo many times I have heard of tenants who sign leases without knowing 100% what they will be responsible for paying for.  They simply ASSUME that the landlord is paying for certain things (e.g. electric, janitorial, taxes, etc) only to find out after the fact that they will incur additional costs not budgeted for.  Whether you are experienced at leasing office space or not you must never ASSUME!  Building owners and landlords tend to quote lease rates differently so it’s important that you ask and get in writing what all you will be responsible paying for.  Below are a few hidden costs that you will want to keep a look out for.

Electric – Not all office building lease rates cover electric costs.  Just because the landlord says the lease rate is $24 sf full service does not mean that it covers electric.  Never assume.  You must ask each landlord whether electric is included or not.  In Austin, Texas office space electric costs average $1.50 to $2.50 sf.  If the landlord is not paying for this and you did not budget for it then you might be in the wrong office building.  If you’re leasing 5,000 sf this could add up to over $10,000 per year.  Also, most buildings have a clause in the lease that only allows you up to use a certain amount of electricity.   Go over this amount and you will have to pay extra.  So it’s important that you evaluate you electric needs before signing a lease.

Freight Elevator Time – When you move into a new building you may not be allowed to use the passenger elevators.  Instead you will have to use the freight elevator after business hours.  Make sure you are not being charged for the after hours usage.  If you are then you need to make sure the amount is in your budget.

Light Bulbs & other maintenance – Make sure you find out if miscellaneous maintenance costs are being charged back to you.  Some leases may say that only the landlords workers can change light bulbs at $XX per bulb.  If that is the case can you change them yourself?  Make sure you ask all the right questions so you know who is paying for what each month.

Real Estate Taxes – How are the real estate taxes in your building being charged?  What happens if the taxes go up or down?  Are you being charged or do you receive a credit?  In most cases landlords pass through all the tax increases to the tenant.  Is the lease a NNN lease or a base year lease?  Make sure you understand the difference.

Pre-existing condition Clause – Many lease contracts have a clause that states when you move out of your office space you must deliver it back to the landlord in the same condition as when you first leased it.  That means if you changed anything (e.g. paint color, walls, lighting, etc..) you have to remove or reinstall everything as it was before.

These are just a few examples of costs that many tenants don’t think about.  If you have any questions don’t hesitate to contact us.

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