Commercial Leasing: Industrial & Office
Posted on January 15, 2019 by Genet Group
Having a lease that benefits both the landlord and the tenant is imperative. There are various types of leases in the real estate industry, therefore, being accustomed to them all is crucial while you’re choosing any party. You might end up in hard negotiations, but if you’ve done your homework, then you won’t be intimidated. Take the time to get a brief rundown of commercial and residential leases, so you’re entirely knowledgeable beforehand.
It’s quite simple, and most people don’t have trouble understanding it, either. Tenants usually need to pay their rent and utilities which comprise of water and sewer exclusively. You would settle the amount with the landlord, and an agreement would be drawn without many complications. However, commercial leases are a bit more complicated, and several other factors need to be considered. Your business type often determines the type of contract that you would be paying the landlord.
Most retail stores that are seasonal tend to have fluctuating sales that depend on various factors. Ask any Christmas or Halloween store, and they’ll tell you what their particular peak season is of the year. Therefore, lease arrangements need to be made with these commercial stores accordingly. The landlord should devise a plan by talking with the tenant to ensure low lease payments during slow months. These sorts of leases are generally known as Percentage leases to offer the retailer a solid option to maintain their rent and business when traffic is slow.
If there is an office space with a steady income flow, then a gross lease would be best suited for these conditions. The tenants would prefer a residential type of lease agreement where there is a fixed amount every month, and they’ll also be responsible for their utilities. However, the building maintenance and repair charges aren’t included in these agreements; the landlord would be responsible for them.
Firstly, the buildings that are given to these heavy-duty industries must be robust and should withstand maximum wear and tear. As these industrial spaces are machine intensive and would cause significant strain on the structure, the lease agreement should be pinned down considering all the contributing factors. Most landlords would prefer a Triple Net Lease in these situations as the maintenance costs are quite high and they’ll want the tenants to do their fair share.
In the Triple Net Lease, the tenant is bound to pay a significant share of expenses of operation, insurance, and taxes for the rented unit. This works best for both parties as the landlord can keep maintaining the structure more appropriately, and the building withstands the operations of the business. It does cause a strain in the backs of tenants as they have to pay more. However, if they choose the right building with the proper structure and age, this can efficiently work for both parties.
Lastly, it’s important that you devise an excellent leasing agreement with your lawyer in the room so both parties are crystal clear on the terms and no ambiguities are left. If you do your homework before, then you won’t end up in problems later! Keeping our customers informed throughout the time of their lease is our top priority. We manage over 1.8 million square feet of properties, and to continually do so, we stand by our word when conducting business.
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