Signing Your First Commercial Lease? What You Need To Know About Build-Outs And Common Area Costs

When you are exploring your options for commercial space rental, whether you are negotiating a build-to-suit lease or simply remodeling an existing space, you'll want to understand what drives your lease rates. One of the most complex and confusing portions of a commercial lease is the square footage measurement for rental purposes. Here is a look at how your commercial lease is evaluated based on square footage.

Usable Space

The primary part of your commercial lease figure will be for the usable space. This is the space that you actually set up your operations, office space or retail store in. Depending on the type of space you're looking at, this may be simply the square footage of a single store front, suite or office. If you're moving into a multi-story space, your usable space will be everything inside the core building footprint, including stairwells and elevators that are only accessible from your space.

In some smaller office spaces, your usable space won't be adjusted for any structural posts, columns or exit doors. This may mean that you actually have less actual floor space than what you are paying for in the usable space calculation.

Common Areas

If you are leasing a build-to-suit commercial property with a single structure on the land, you won't have to worry about common area charges. But, for business owners who are leasing commercial space in a multi-business property, your lease rate may include a common area factor that is designed for each tenant to pay a portion of the maintenance and upkeep costs for the main areas of the building. There are two primary types of common area charges, floor and building fees.

Floor Common Area Surcharges

This surcharge is typically added for each tenant on a given floor. It includes the maintenance and wear costs for the specific floor that the tenant is on.

Building Common Area Surcharges

In a building with several floors and many tenants, you'll also have a building common area fee. This is a charge that is distributed to all of the tenants for the main entry ways, elevators and stairwells as well as any other main common areas used by all of the tenants.

In order for each tenant to pay a portion of these costs, the landlord will add the surcharge to your lease payment. The percentage is typically determined by the total square footage that you are leasing. For example, if the property owner has a building with eight suites per floor, the common area surcharge for that floor will be just over 12 percent per suite.

Based on that calculation, a tenant who is leasing three quarters of a floor will pay more for the common area charges on that floor than a tenant who is only leasing one quarter, because the tenant leasing the majority of the floor is using more of the common space.

Most commercial leases will include the common area charges as a combined rate for both the building and floor. If you want to know the actual breakdown of the floor and building charges, the property owner should be able to provide that.

Maximizing Usable Space During Renovations

When your commercial lease is based on your usable space, you'll want to make the most of that space at all times. Before you move into a commercial suite or office, take time to work with the project manager of the construction project to remodel the unit to fit your needs. Consider the workflow or retail layout that you want to create and optimize your design accordingly. Optimize the vertical space as much as possible, putting displays on the walls and on vertical racks to save floor space.

With the information presented here, you can tackle a commercial lease negotiation and office space design with confidence, even if it is your first time. Understanding the fundamentals of your lease charges will make it easier for you to evaluate the rates and ensure that you are paying a fair and reasonable price.

For more information on leasing and where to go from there, consult a construction project manager, like those at Dargent Companies and other local businesses.