A Guide for Commercial Real Estate Tenants: Understanding the Variable Cost Risks of a Commercial Lease

Skills and Scale
A Guide for Commercial Real Estate Tenants: Understanding the Variable Cost Risks of a Commercial Lease

Organizations choose to lease commercial space for a variety of reasons, including: long-term financial objectives, ability to access limited resources, questionable long-tern market viability, and other considerations strategic to their individual business needs. These organizations may consider a variety of factors when evaluating a lease, including lease versus buy analyses and other financial influencers. However, organizations often fail to fully understand the financial risks associated with the leases they engage in beyond base rent factors, specifically considering additional rent expenses, such as common area maintenance charges. Depending upon the nature of the leased premises, these additional rent elements can exceed 50 percent of the annual base rent expenses.

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