Types of Commercial Real Estate Leases
Commercial real estate leases can vary significantly depending on the type of space and location. A business that leases space in the downtown area of a major city will have a completely different lease structure than a business that leases space in a suburban shopping center.
The following examples highlight some of the more common commercial lease structures:
o Gross lease: In this type of lease a tenant will pay a fixed amount for rent while the landlord is responsible for paying taxes, insurance and other associated expenses.
o Net lease: The tenant covers the base rent and a percentage of maintenance, insurance, and other operating fees.
o Triple-net lease: Typically written for a freestanding facility, the tenant pays all fees and expenses associated with the space.
o Shopping center lease: The tenant pays a base rate in conjunction with the square footage of the retail facility. Typically, the tenant will also pay some common charges and frequently a certain percentage of the gross sales. The tenant may also be assessed part of the property taxes. A shopping mall lease will often include terms about signage, hours of operations, common areas and deliveries. The landlord may also have the right to relocate the tenant.
o Land or ground lease: The tenant leases the ground itself and usually builds on the property. In the majority of land/ground leases, all improvements to the property including development of infrastructure and facility construction will revert back to the landowner when the lease ends.
Keep in mind that there are a number of variations on these types of leases. One example is if a company wants to lease office and warehouse space within the same facility. They might sign a universal lease that stipulates separate rent and lease options for both spaces.