Commercial Rent Calculator

The app that makes calculating commercial real estate rent schedules easy

Simply input base rent, annual increase, length of term and square feet to calculate the rent schedule for the entire lease term, even if it is 100+ years. Optionally add CAM charges (operating expenses) and/or sales tax. The results display the rent amounts per sq. ft., per month and per year for each year of the lease term.

This app is perfect for real estate leasing agents and brokers, landlords and property owners, asset managers and property accountants, tenants and anyone else in commercial real estate.

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Full Service Lease vs. Triple Net Lease

👤 🕔 May 20, 2014 0

Full service and triple net leases are two of the most popular lease agreement types used in commercial real estate. Even though both documents contain many similar provisions, they are quite different and should be used according to the type of property being leased. The main difference between a full service lease and a triple net lease (also referred to as NNN lease) is how they address the subject of real estate taxes, insurance, and other operating expenses associated with leasing the property.

Full Service Lease

As the name implies, a full service lease rental rate includes not only the rent for using the space (sometimes referred to as the “capital portion”), but also charges for all the building expenses and services, such as insurance, real estate taxes, utilities, trash removal, etc. The cost of these items is already factored in the full service lease rate and the landlord is responsible for coordinating and paying for these items. In addition, the landlord should provide a clearly itemized operating statement detailing the distribution of the full service lease rental rate amongst the various expenses. Typically full service leases are used in office buildings.

Operating Expense Stop

Full service leases may also have an operating expense stop provision. An operating expense stop is the maximum amount the landlord will pay towards the building expenses and services of its full service leases. Any costs exceeding the operating expense stop are passed through to the tenant, meaning tenant is responsible for paying the overage. Usually the operating expense stop is set to the amount of the estimated operating expenses for the first year of the lease term.

From the Lease Agreement

“Tenant, on the first day of each month during the Term, shall pay to Landlord, as Additional Rent, without demand, offset or deduction, an amount equal to 1/12 of its proportionate share (“Tenant’s Proportionate Share”) of the budgeted Operating Expenses as calculated by Landlord (prorated for any partial month) to the extent such Operating Expenses exceed the Operating Expense Stop.”

Triple Net Lease (NNN Lease)

In a triple net lease, the tenant is solely responsible for all expenses and services associated with its occupancy of the leased space. The three N’s in “NNN lease” refer to taxes, insurance and common area maintenance as the three items that the tenant will be paying for. The actual triple net rental rate is money being paid exclusively for the real estate and does not include charges for any of the other expenses. The landlord then imposes a CAM (common area maintenance) charge on the tenant, which covers real estate taxes, insurance and any additional expenses that landlord may incur in association with operating the property. Sometimes the tenant may be responsible for paying items such as utilities and trash pickup directly to the vendor providing the service. Most often triple net leases are offered on retail, flex and industrial properties.

It is very important to understand how your landlord handles operating expenses and services before you sign a lease. These costs need to be considered carefully when choosing a location, as they can significantly affect your bottom line in the long run. If comparing full service lease rates and triple net lease rates, always remember to first add the NNN expenses to the later, and then use the cumulative rate for comparison.

The Importance of Tenant Representation

👤 🕔 January 16, 2014 0

Hiring a real estate broker to represent you in your search for commercial space (also known as tenant representation) may not seem as a necessity, however it may prove very beneficial to your success. The process of leasing or buying commercial real estate can be complex and confusing for the unexperienced, so having a broker on your side can make things easier.

Tenant Representation Services Are Free

The first and foremost thing to mention here, is that typically commercial real estate brokers are reimbursed for their tenant representation services by the owner/landlord in the transaction. Brokers provide their services to tenants at no charge. Tenant representation is highly desirable among brokers so don’t be shy in asking a commercial real estate broker to represent you.

Other Tenant Representation Benefits

Most brokers will be able to assist you throughout the entire process. They have extensive knowledge of the local real estate market, and can provide valuable insight in choosing the right location for your business. They can supply demographic and household income data, traffic counts, rent and CAM comparables and other information that can prove priceless in choosing the right location. Commercial real estate brokers also have access to paid listing services and will be able to provide you with a list of prospective locations featuring detailed information on each location.

In addition, most tenant representation brokers already have an established working relationship with many owners/landlords and these relationships may add leverage to their negotiating power. Keep in mind that even though they represent you, they get paid a higher commission on higher rents so don’t be afraid of asking your broker to negotiate the terms of the lease. Depending on the economic conditions, the amount of vacancy in the market and other such factors, an experienced commercial real estate broker may be able to negotiate a lower rent, a free rent period, and tenant improvement allowance. Your broker will also be able to explain to you all provisions of your lease agreement.

Your broker will be the main point of contact between you and the owner/landlord (or landlord’s broker) throughout the lease negotiations and beyond. As a part of the tenant representation, he or she will also assist you with renewing your lease, relocating or even renegotiating certain terms of your existing lease in some situations.

The Tenant Representation Agreement

Most brokers will ask you to sign a tenant representation agreement, which officially identifies them as your exclusive commercial real estate broker on record and protects you and them from other parties that may claim otherwise. You should direct all real estate matters to your broker and should not engage in negotiations or discussions with other parties that may later have claims regarding representation or commission. The term of a such agreement is usually one year, and can be renewed on an annual or month-to-month basis. Either party should have the option to cancel the agreement with a thirty day notice.

10 Things to Consider When Leasing Retail Space

👤 🕔 September 23, 2013 0

We compiled a list of what we think are the ten most important criteria to consider when retail leasing for your business.

1. Rent

OK, the first one is pretty obvious. Being able to keep your doors open will largely depend on whether you can afford your monthly rent, so when searching and comparing properties, focus on locations with rental rates that fit your budget. Also, don’t forget to take into account the annual increase of your rent, which usually kicks in at the beginning of each consecutive lease year during your lease term.

2. Operating Expenses/CAM

CAM is the second largest expense associated with retail leasing. Even if one property offers lower rents, it may end up being costlier on a monthly basis depending on its CAM charges. The best thing to do, is to add your rental rate and the operating expenses rate, then compare properties based on this cumulative monthly expense.

3. Demographics

“If you build it, they will come.” Not true. When it comes to demographic data, you need to look at the total population, the number of households, and the average household income within 1, 3 and 5 mile radii. These are the three most valuable statistics to consider when determining whether there are enough people nearby to support your business and if they can afford shopping with you.

4. Traffic

In retail leasing, traffic counts and patterns can also make or break your business. The higher the traffic count near your store, the more potential customers you are going to be exposed to. Another important traffic related issue to consider is whether the entrances/exits to the property are at a signalized intersection. People tend to avoid places that are hard to get to. Last but not least, you need to consider whether you are on the “right side” of the street. Depending on your business, you may want to be more conveniently located “on the way home” or “on the way to work.”

5. Signage

Signage is crucial in identifying your business location; without it your store will be very hard to spot. Building fascia and pylon signs are the two most popular types of signage offered by landlords in retail leasing, however not every tenant is offered a spot on the pylon.

6. Tenant Mix

When it comes to leasing retail space, you want to be in the “right” company. Properties with businesses that attract similar clientele will most likely bring more foot traffic to your doors as well. Are there any “anchor” stores? As the term implies, grocery stores and larger retailers attract and keep shoppers longer on the property, which is beneficial to the smaller tenants as well.

7. Competition

Areas with fewer competing businesses will obviously give you a higher market share and more customers. This is especially crucial when you first open your store as this is the time to build a solid and loyal customer base. In addition, you need to request an exclusive clause in your lease, meaning your landlord will not lease stores to any other companies that are in the same business as you.

8. Parking

Sufficient and convenient parking is also important in ensuring your customers will keep coming back. As a general rule in multi-tenanted properties, each tenant is allotted parking spots based on the ratio of a particular number of parking spots per 1,000 leased square feet (ex. 4 spots per 1,000 sq. ft). Depending on the type of business, landlords sometimes offer dedicated parking as well.

9. Concessions

Depending on factors such as economic conditions and the amount of vacant space in the market, landlords may offer different concessions to sweeten the deal. Free rent and tenant improvement allowance are the two most popular in retail leasing.

10. Landlord and Property Manager Reputation

You negotiated and signed an awesome 5 year lease. Three months later, your roof is leaking and no one is answering the phone at the landlord’s office. Now what? When leasing retail space, also take note of the landlord and property management company and take some time to research their reputation. Neighboring tenants in the property as well as other real estate professionals may be willing to share their experiences, both positive and negative. And of course, there is always Google.

The Exclusivity Clause Explained (Non Compete Clause)

👤 🕔 May 8, 2013 0

An exclusive clause, or non compete clause, in a retail lease basically states that the landlord will not lease any additional space in the property to businesses competing with yours. Well, competition is somewhat inevitable when it comes to retail stores, so who would qualify as a “competitor” in this situation?

What is an Exclusivity Clause Based on?

When you sign your lease, you will most likely be asked to describe the “principal business” of your store. This information, also referred to as “primary use,” becomes the core of your exclusivity clause as it now prohibits the landlord from leasing space to any other company in the same principal business. Now this is where it gets tricky! One definition of principal business is “deriving more than twenty-five percent (25%) of its gross sales from said principal use.” What does this mean? It means that if you are in the principal business of selling “majiggerthings”, your landlord would still have the right to lease space to another “majiggerthings”-selling store, as long as no more than 25% of that store’s gross sales are derived from selling said “majiggerthings.”

As stated earlier, retail competition is inevitable to some degree. If landlords would grant 100% exclusivity on any one “principal use,” it would be almost impossible to accommodate multiple businesses in the same property. For example, if a sandwich store is granted 100% exclusivity, that would mean that no other establishment in the shopping center would be allowed to sell sandwiches. Well, a sit-down restaurant may offer sandwiches as well, yet they are not in direct competition with our take-out sandwich shop. Landlords try to accommodate real estate exclusives as much as reasonably possible, as the success of every one of their tenants is in their best interest as well.

Does an Exclusivity Clause Apply to Anchor Stores?

One important point to mention is that exclusivity clauses normally do not apply to the anchor store in the shopping center. To continue our example, a grocery store would be allowed to sell as many “majiggerthings” as it likes regardless of your exclusive.

As with all other privileges granted to you by the lease, keeping your non compete clause may be contingent upon your good standing and not defaulting on any provisions of your lease. The exclusive clause has become a relatively standard provision in retail leases, however if it is not a part of the lease you are looking to sign, don’t be afraid to ask your landlord to include it. Competition can make or break you in retail so protecting your “principal business” with a non compete clause may help you avoid issues further down the road.

From the Lease Agreement:

“Provided Tenant has been in good standing and has not been in default during the term of this Lease, whether or not cured, Landlord agrees that it will not enter into any other lease for storefronts in the Shopping Center, which lease shall permit as a principal business (principal business being defined as deriving more than twenty-five percent (25%) of its gross sales from said principal use) in the use clause thereof: [enter the principal use the exclusive is granted for]. This exclusivity clause will not apply to [enter retailer name if any], nor their successors or assigns, or any outparcels, now or in the future.

This exclusivity clause shall become null and void if:

(a) Tenant defaults under this Lease for any reason beyond the cure period;
(b) Tenant assigns its rights under this Lease in whole or in part or sublets any portion of the Demised Premises without Landlord’s consent;
(c) The Tenant or the entity signing the lease changes, through sale, transfer of stock or any legal proceeding;
(d) The Demised Premises are no longer being used primarily for the principal use for which this exclusivity clause was granted.

Landlord shall use its best efforts to resolve any conflicts arising from the exclusive, but shall be held harmless for any damages whatsoever resulting from the granting of this exclusivity clause.”