As a business owner, choosing your business space is one of the most vital decisions you can make. It doesn't matter if you are a small retail store or a large multi-national company, the right space is going to make an impact on your business. The wrong space and, well, you get the idea.
Navigating the ins and outs of a commercial lease isn't easy. A commercial real estate agent is up to the task of finding you the most optimum space and for the best deal possible. There is some negotiating that can go into signing a new lease, so you want to make sure that your agent is well versed in the language and you understand what you are signing up for.
In the commercial real estate industry, there are five main types of leases available to you and your business:
• Percentage lease
• Net lease
• Double-net lease
• Triple-net lease
• Gross lease
- Percentage lease means that you, as the tenant, will pay the base rent plus a percentage of your monthly sales to your landlord. Typically, this kind of lease would be best suited to a retail business or a mall.
- Net lease sees you pay rent plus some or all of the property taxes. A double-net lease sees you pay rent plus property taxes and insurance on the property. A triple-net lease sees you pay rent plus property taxes, insurance, and maintenance on the property.
- Net, double-net, and triple-net leases are typically the most common kinds of leases you will encounter. As a business, you want to make sure that you are signing the right kind of lease to fit the size of your business and something that seems fair for what you are getting out of the property. A small boutique probably isn't going to do so well if they have agreed to a triple-net lease, paying out the ears and inflating their overhead.
- Gross lease, Lastly, we have what is called a gross lease. What this is means it that landlord pays all or most of the usual costs associated with the building or space, and these costs are then billed to the tenant as a “load factor.” A “load factor” is a way of determining what the tenant owes monthly based on usable square feet and a percentage of square feet of common areas, like lobbies, hallways, elevators, stairways, and bathrooms. Usually, you will see this kind of lease in office space and industrial areas and sometimes in retail leases, depending on the size of the building.
As you can see, there is a lot that goes into signing a new commercial lease. While you may know your business inside and out, you may not know the best way to secure the best lease possible or even what the best kind of lease is. With the help of a commercial real estate agent, you can rest easy knowing that your business is going to thrive in its new space and you won’t have to worry that you have signed the wrong kind of lease for the space that you need.