COMMERCIAL PROPERTY LEASING
TENANT REPRESENTATION SERVICE IN KANSAS CITY
Helping your access to more properties is only one of the benefits that come from buyer/tenant representation. Another is the fact that we have local market knowledge which can help you find the right property for your business needs. A tenant rep will be able to determine the type of property you need and which properties on the market will be the best fit.
Tenant Representation
Tenant reps are generally experts on the local commercial market. This means that you can rely on us to identify the property you need and determine what you should be paying in rent. Local knowledge ensures that they know what the commercial market is doing and if the property you want to rent is actually being overpriced. This can make a lot of difference to a smaller business, but larger businesses can also benefit from getting the right rent.
Tenant representatives will also be able to advise you on the most commonly used lease types in the area. This can help you determine if you should accept a proposed offer or if you can try to negotiate a different lease type. The type of commercial lease you have will affect the amount you pay and what you are liable for which is why you need to be careful.
Even the most experienced commercial tenant can become confused with the progress of their deal or determining which side has the most leverage. This confusion can cause a lot of problems when you are renting because you could sign a lease that is not ideal for your business. This is where we will be able to help as we understand the changing nature of commercial leasing agreements.
Our specialists will also be able to handle any negotiation with the landlord for you. The negotiation process can take a lot of time which is something that you may not want to worry about. When you hand the negotiation to us, we will work on it and manage the entire leasing process for you while you focus on your business.
Little About Leases
Since every lease can be different, most think the important things for a tenant and landlord to understand are which expenses are covered in the lease and which are excluded, which is of course very important, but understanding which lease or terms fits the landlord/tenant business plan and/or vision the best is as important in the short or long term.
Our team is well equipped to help tenants and landlords navigate safely through all types of lease structures.
While leases can vary widely from one property to the next, there are several types of leases which are commonly found in commercial real estate and they can get confusing very easily. It’s worthwhile to consider the various expenses which a tenant or landlord might incur in a lease. Knowing which side of the ledger an expense falls – landlord’s or tenant’s – means knowing how to predict the TRUE cost to rent a property.
A lease structure often depends on the landlord’s preference and what is common in the marketplace. Here are some common lease structures.
Absolute Net Lease
An absolute net lease typically pushes all the expenses to the Tenant, including taxes, insurance, maintenance, roof, structural, and parking lot maintenance and repair. This lease typically occurs on a single-tenant building which a landlord builds to the tenant’s specifications and then turns over to the tenant on a long-term lease. The tenant is often a large corporation that knows clearly what it’s entering, and is prepared to take on all the expenses. Because the tenant takes all the operating risks, the landlord is willing to accept a lower rental rate.
Triple Net Lease
A triple net lease is typically net of three expense categories: real property taxes, insurance and maintenance. These expenses are often called operating expenses, or pass-through expenses, because the landlord passes them through to the tenant in the form of additional rent over and above the base rental rate. This extra charge is sometimes referred to as TICAM (taxes, insurance and common area maintenance). Often identified as an “NNN Lease”, a triple net lease can occur in a single-tenant or multi-tenant building.
If single-tenant, the tenant typically takes control of the landscaping and exterior upkeep, thus controlling the property’s appearance. If multi-tenant, the landlord typically controls exterior upkeep, so that no single tenant can ruin the appearance for the others. In addition, tenants of multi-tenant buildings pay their pro-rata share of the operating expenses. Tenants are usually afforded the right to audit the landlord’s operating expenses under this lease structure.
In triple net leases, tenants usually pay their own janitorial expenses, interior maintenance expenses (such as HVAC maintenance) and their own utilities. If utilities are not separately metered, then the tenant pays its pro-rata share of the expense. Landlords usually pay to keep the roof and structural elements of the building in good condition.
In a triple net lease, the tenant bears the risk of paying property taxes, insurance and operating expenses, allowing the landlord to limit its risk of rising operating expenses.
Modified Gross Lease
A modified gross lease typically binds the landlord to pay the real property taxes, insurance and common area maintenance, while the tenant takes responsibility for its own utilities, interior maintenance and janitorial. The landlord is usually responsible for roof and structural elements, just as in a triple net lease. Because the landlord is taking on more expenses than a triple net lease, the rental rate is higher than it would be under a net lease structure.
The advantage to the tenant of this lease structure is that the landlord takes on all the risk of rising operating expenses, and manages many elements of operating the property, including exterior maintenance. The tenant pays a relatively predictable rental rate and does not have to be involved in the real estate business. One potential disadvantage to the tenant is that the landlord may charge the tenant a premium to take on these expenses and risks, though this is not always the case.
Full Service Lease
Just as the name implies, a full service lease covers all – or most – of the operating expenses in a lease. Some of the few exceptions are telephone and data expenses. Otherwise, the landlord pays taxes, insurance, common area maintenance, interior maintenance, janitorial, utilities and so on. As a result, the rent is relatively high. These types of leases usually occur in large, multi-tenant office buildings where it is too difficult or cumbersome to divide up the utilities among tenants.
The advantage to the tenant: one predictable rental payment without bearing any operating risks. The potential disadvantage is that the landlord may charge a premium to take on these expenses and risks. Many landlords appreciate this type of lease structure, as it gives them total control of the property’s appearance and maintenance.
In closing, both landlords and tenants must take the time to understand the lease contracts they enter into. Likewise, both landlords and tenants stand to realize value by engaging the services of a commercial real estate professional to represent them in a transaction. Contact a team member at Carthage Real Estate Group to discuss how we can advise on leasing a commercial property.
Commercial leasing process
Determine Your Needs
Review your existing lease if applicable Determine your size requirements Define your desired location Discuss your budget and timeline
Step 1
Provide Options
We will prepares a list of available properties and “out of the box” opportunities that meet your requirements Discuss options and coordinate a corresponding tour based on your selections
Step 2
Tour the Properties
We arrange a visit the sites, and view selected properties in person Discuss your needs and your concerns about each property Narrow the properties to a “shortlist”
Step 3
Negotiations
Prepare your financial support documents and your Business plan We prepare non-binding negotiating documents for selected properties and share the financial with landlord’s broker We negotiates for your best business terms
Step 4
Final Property Lease
Your attorney reviews your lease
