Real estate properties do not all quote the same format on lease rates. This will mainly depend on the preferences of the landlord, the current market, as well as the type of property you are looking to lease; becoming quite difficult to understand at times. It’s always crucial to understand the commercial lease structure that the landlord propose, especially when you are comparing different options. Ensure that both you and your broker know who pays for what, and that the lease contracts clearly states what all the costs involved are.
Gross Leases vs. Full Service
Most office buildings will provide lease options that are based on either a Gross or a Full Service agreement. This means that the rate quoted will include all the building operational expenses, such as insurance, taxes, maintenance, utilities, and other services. These property buildings will often offer you a specific Base Year with regards to operational expenses, where the tenant pays for any annual escalations or increases that exceed the agreed or basic costs during that Base Year. This year oten start when the lease takes effect.
Triple Net Leases (NNN)
Many R&D / Flex, industrial office buildings will offer their tenants a NNN lease, or a Triple Net lease. This lease requires that tenant to pay a Base Rent amount, as well as all the additional operating expenses for that specific property; including taxes, maintenance, and insurance. However, in these cases, the tenant usually pays for its own utilities and janitorial services, although this might be included in some NNN leases.
Often in Austin, NNN leases are typically quoted in properties, and the tenant is responsible for paying all the utilities and janitorial fees. Some retail tenants might be required to pay additional amounts, which reflect a percentage of their gross sales.
Monthly and Yearly Quoted Rates
A lot of flex properties and industrial properties will quote a monthly rate, and this means that if a quoted prices is given as $1.25 SF for 5,000 SF, it will amount to $6,250 per month. Many retail properties choose to quote a yearly rate which means that if they have a price of $20 SF for 5,000 SF, it will amount to $100,000 during a one year period, or as $8,333 per month.
Janitorial and Electric
In the majority of the flex, industrial, and retail properties, tenants are often required to be responsible for their own janitorial and electric payments. Depending on the size of your particular commercial space, normal averages for electric will be roughly $1-$2 SF per annum. Depending on the amount of days you select this service, the janitorial can average roughly $1.50 to $3 SF per annum.
It is very important to know and to understand exactly how the lease structure is proposed by the landlord. You need to know who is paying for what services, and this is especially important if you are considering different options. If you have questions or need professional advice, please contact us.