Commercial leasing can be used for a range of building types and uses, including corporate style buildings, professional offices, warehouses, industrial buildings, retail space etc. There is no such thing as a “standard” lease, so each party to the lease needs to have some basic understanding of the process, and in Florida, an attorney is required to draw up the document.
A typical way to start the lease process is for the prospective tenant to send a “letter of intent” (LOI) to the landlord outlining the basic terms. These can include the size required, the rate offered, the length of the lease, tenant improvement (TI) requirements, renewal options, signage etc. This non-binding document can be used by your Commercial Realtor to negotiate most aspects of the lease before the lease itself is drawn up. Typically, the landlord will provide the lease, and some negotiation will still be required to make sure the terms are fair and balanced. This is where having a good Real Estate attorney can pay dividends.
Common terms associated with leasing are Net, Triple Net (NNN), Gross, Modified Gross etc., and each implies a different level of responsibility for the tenant. A gross (or full service) lease is commonly found in multi-story office buildings, such as we have in downtown Tampa. This will include the operating expenses for the building, but the landlord remains responsible for paying them. A gross lease can work well for the tenant because they can largely predict their costs for the life of the lease. Of course the landlord normally keeps some factors in play to avoid being caught with a major a change in operating expenses. Landlords can set the first year of rent as the “expense base” year, and charge a proportionate amount in increased costs each year thereafter based on the rentable square feet.
In these buildings one thing to watch out for is rentable versus useable square feet. When you lease 2000 SF in an office building, your actual space available to use will normally be about 80% to 85% (in this example 1600 SF) of what you pay for, because the tenant is required to pay for common space both on the floor they use, and on the floor where the entry is located. This helps cover the costs of hallways, bathrooms, janitorial closets, elevators, entry foyer etc.
A triple net lease on the other hand is commonly used to lease professional office buildings, warehouses, and retail space. A net lease is one in which certain expenses are passed through directly to the tenant, usually property tax; in a triple net lease, most of the operating expenses for the building are passed through, including property tax, insurance, and common area maintenance (CAM).
To be sure of getting the best lease deal, whether you’re the landlord or the tenant, be sure to work with an experienced Commercial Realtor, and a Real Estate Attorney.
Call me to learn more about the leasing process, and for a recommendation to one of the best real estate attorneys to be found in Tampa.