So, you are thinking about leasing a commercial space?

New businesses starting out have a lot on their plate and finding a location is hugely important. For the person new to commercial leases, there’s a lot of “code” to be deciphered in the listing. Here are the 4 things we get asked the most when sitting down with a client new to the search:

1. How do you interpret the price per square foot?

Some leases are listed as a monthly net or gross amount and that’s easy to understand. When they are listed as a price per square foot it involves an extra step to determine the monthly rate. Fortunately, it’s a simple equation: the price per square foot is stated as an annual rate so if a 1000 sqft. space is $20/sqft then it is $20,000/year or $1,667/month.

2. What is T.M.I?

T.M.I. stands for Taxes, Maintenance and Insurance. In a net rent situation, the tenant will pay a portion of the landlord’s realty taxes, maintenance expenses and property insurance based on the percentage of the building the tenant is occupying. Year end statements from the landlord can be (and should be!) provided to the tenant to show where the money was spent and if any adjustments are needed. T.M.I. is paid monthly in addition to the base rent.

3. Triple-Net! Gross! No you’re a Triple-Net!

It’s not name calling, it’s just an identifier for the type of lease. A Gross lease is all inclusive (T.M.I. and utilities) and a Triple-Net lease (or net-net-net) includes, well, nothing but the base rent and everything else is extra. It gets more complex than that, but when you see a lease amount listed as “net” your next question should be “what is in addition to this?”

4. Lease term?

Just two words would make this clearer on a listing: “minimum” and “maximum”. And maybe “months” or “years”… 3/5 means the landlord is looking for a minimum 3 year (max. 5yr) lease and 48/120 means they are looking for a minimum 48 month (max. 120mo.) lease. Yes, it’s inconsistent.

This is just scraping the surface for understanding a commercial lease listing but with the above some initial costs can be projected. The one thing you’ll notice is that you’ll have a lot more questions once you focus on some potential matches! Let us know and we’d be happy to answer.