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Details to pay attention to in commercial real estate leases

When negotiating a commercial real estate lease, you may feel overwhelmed by all of the different terms and options that you have. Commercial real estate leases can vary extremely widely in terms of what they offer. For example, a commercial real estate lease for an office space may include everything from insurance and lighting to cleaning services. However, another may only supply the right to be in the space and requires that the tenant arrange all other services for the property themselves.

If you don't know where to start when it comes to deciding on the type of commercial real estate lease that is best for you, you should start paying attention to some of the key terms commonly found in these leases. By doing so, you will be better equipped to decide on some of the details.

Base rent

The base rent refers to the lowest amount that you will need to pay each month. Other variable costs such as electricity and water will likely be added to the base rent.

Percentage lease

Some commercial real estate leases charge based on gross sales that are made on the premises. For example, a retail space may charge a base rent and demand a 5% percentage lease in addition. This will mean that 5% of gross sales will need to be paid to your landlord.

Load factor

If a tenant is renting a portion of an office space, they may be charged by load factor. For example, if they take up 20% of the total usable square footage, they will be charged 20% of all rental costs for the space.

Commercial real estate leases usually require strategic negotiation before both landlords and tenants can settle on a deal that is good for everyone.

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