The condition of today's commercial real estate marketplace and specifically, the very difficult environment the commercial property owner faces in managing through today economic climate makes being a landlord challenging. The broad types of concessions offered to tenants to enter into leases in today's Indianapolis office space market, landlords may begin looking for alternative ways to generate income to offset costs. That means tenants need to be aware of how building operations and different facets of occupancy translate into ongoing costs.
One of the more common instances of building operating costs that catches tenants by surprise involves the many forms of general building maintenance, such as heating and cooling systems maintenance and general maintenance of the building common areas.are typical maintenance items in most building. However, if these items are not specifically defined in a lease, the door is open for landlords to consider it an extraordinary expense and subsequently, may charge extra for these items. As a tenant, you should take extra care in negotiating your lease terms to make sure there is no vague lease language relative with respect and standard building maintenance.
The square footage of your space is directly related to your monthly rent and pro-rata share of expenses so it is critical that you ensure your office is measured according to objective standards. The Building Owners and Managers Association (BOMA) has created extensive benchmarks for measuring commercial real estate, and they include a litany of guidelines that are often misinterpreted. Quite literally, you have money riding on the calculations; thus, it pays to double check square footage before signing a lease or accepting your space. Within my home base market of my firm, Carmen Commercial Real Estate, it is amazing how often commercial landlords have miscalculated the square footage of the office space they're leasing to tenants. For this reason, I've begun to have our project manager do an as-built calculation of my client's office area to make certain our clients are only paying for what they're actually leasing.
If your office is located within an office park or business center that might contain shared exterior amenities, your share of maintaining these common areas needs to be reviewed whenever an expense "pass-through" is billed by the landlord.
Office and industrial vacancy has steadily increased nationally and specifically, in the Indianapolis commercial real estate marketplace during the past 12 months. If the building operating expenses for your lease are abnormally low, down stream increases in occupancy can lead to significant increases in the variable expenses and subsequent pass-through amounts the landlord bills to tenants in addition to base rent. The best protection is doing your homework on the front-end of your lease by making certain the landlord is grossing-up the building operating expenses. Grossing up calls for you to request that the landlord set your base year on costs assuming a stabilized occupancy such as 95%, regardless of the existing occupancy when the lease is signed and the base year is established.
Finally, your right as a tenant to audit a building's operating account is a very valuable right to negotiate into your lease, as it can help you uncover evidence of incorrect or misleading annual pass through charges. This may be challenging for the novice, however, your real estate professional should be willing to perform such an audit, especially since they were partially responsible for negotiating the terms of your agreement.
One of the more common instances of building operating costs that catches tenants by surprise involves the many forms of general building maintenance, such as heating and cooling systems maintenance and general maintenance of the building common areas.are typical maintenance items in most building. However, if these items are not specifically defined in a lease, the door is open for landlords to consider it an extraordinary expense and subsequently, may charge extra for these items. As a tenant, you should take extra care in negotiating your lease terms to make sure there is no vague lease language relative with respect and standard building maintenance.
The square footage of your space is directly related to your monthly rent and pro-rata share of expenses so it is critical that you ensure your office is measured according to objective standards. The Building Owners and Managers Association (BOMA) has created extensive benchmarks for measuring commercial real estate, and they include a litany of guidelines that are often misinterpreted. Quite literally, you have money riding on the calculations; thus, it pays to double check square footage before signing a lease or accepting your space. Within my home base market of my firm, Carmen Commercial Real Estate, it is amazing how often commercial landlords have miscalculated the square footage of the office space they're leasing to tenants. For this reason, I've begun to have our project manager do an as-built calculation of my client's office area to make certain our clients are only paying for what they're actually leasing.
If your office is located within an office park or business center that might contain shared exterior amenities, your share of maintaining these common areas needs to be reviewed whenever an expense "pass-through" is billed by the landlord.
Office and industrial vacancy has steadily increased nationally and specifically, in the Indianapolis commercial real estate marketplace during the past 12 months. If the building operating expenses for your lease are abnormally low, down stream increases in occupancy can lead to significant increases in the variable expenses and subsequent pass-through amounts the landlord bills to tenants in addition to base rent. The best protection is doing your homework on the front-end of your lease by making certain the landlord is grossing-up the building operating expenses. Grossing up calls for you to request that the landlord set your base year on costs assuming a stabilized occupancy such as 95%, regardless of the existing occupancy when the lease is signed and the base year is established.
Finally, your right as a tenant to audit a building's operating account is a very valuable right to negotiate into your lease, as it can help you uncover evidence of incorrect or misleading annual pass through charges. This may be challenging for the novice, however, your real estate professional should be willing to perform such an audit, especially since they were partially responsible for negotiating the terms of your agreement.
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