What Is Commercial Leasing?

This is a lease that you would sign to rent a warehouse, office, or other commercial space and use it to run a business. The terms in a commercial leasing vary widely but most of these types of leases are written to benefit the landlord, not the tenant. Depending on how many other businesses are interested in renting this commercial space you may be able to negotiate better terms with the commercial landlord but many times the landlord is set as to what they want the leasing terms to say and will not negotiate.

There are two types of leasing options that are commonly found in a commercial leasing agreement which are:

• Net lease-this is when the tenant agrees to pay a set rent amount along with a part of the landlord’s maintenance expense and monthly taxes.
• Gross lease-this is when the tenant agrees to pay a predetermined rent amount that also includes the landlord’s expenses.

When signing a lease agreement the tenant will usually be required to pay the first and last month’s rent at the same time to protect the landlord by having an extra month already paid in case the tenant decides to leave without giving the landlord notice. Have an attorney that specializes in commercial real estate go over the commercial leasing agreement before signing it.

In a shopping center, for example, the leasing rent for a retail space could be calculated by price per square foot. With a shopping center commercial leasing agreement it will usually contain specific terms such as where the tenant may have deliveries conducted, rules about the store’s displays, and what hours of operation the store will be allowed to have. There may also be written into the commercial leasing agreement for the retail space that a certain percentage of the profit the tenant receives be paid monthly to the landlord in addition to the monthly rent.

If the business owner, or tenant, feels that they can make a good return on their investment and has the money for a down payment then it might be better if they own the property instead of leasing. If this is not true then commercial leasing is the alternative. Many times new businesses will have the down payment needed to buy the property but instead chose commercial leasing and use the down payment instead for better business investments such as obtaining more inventory for their new business. In addition, when using commercial leasing you do not have all the responsibility that goes along with owning a business.