When signing a lease for industrial property, business owners need to be aware of exactly what they are agreeing to do. There are many different costs associated with operating a commercial property. Examples of typical operating costs are real estate taxes, property insurance, landscaping, snow removal, exterior lighting, and parking lot maintenance. As a potential tenant looking for space to rent, it is important to understand which party will be responsible for performing the necessary work, as well as how the costs will be handled.
Commercial industrial real estate is largely driven by local market forces, and things that are customary in one region of the country may not be in another. For example, rent is quoted by landlords in a number of different ways. The dollar figure usually represents the price per square foot per year, followed by ‘gross’, ‘net’, ‘triple net’, ‘NNN’, etc. The definitions are important, and can vary depending on the context. Most important for a business owner is to understand what the total monthly and annual cost outlays will be to occupy a property.
The agreement between the parties is formalized by a lease which is usually provided by the landlord. An experienced, professional landlord will be able to anticipate most of the potential expenses and likely problem areas and will include and address them in the lease document. A lease that is overly simple may be silent to many potential problems that could arise in the future. In most cases, it is suggested that a potential tenant hire an attorney that is familiar with commercial real estate lease agreements.
To summarize, when entering into an agreement to lease industrial real estate, it is important to understand the elements of the agreement and for all parties to be aware of their obligations, financial and otherwise. Hopefully, this will create a mutually beneficial relationship between landlord and tenant throughout the lease term.
Written by: Tim Breckner, Business Development Officer, Weston Inc.