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Third Biggest Mistake Made By Tenants

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Failure to understand all the office leasing costs

There are more costs involved in leasing office space than just the rent.  Many of these costs are quoted in different fashions so it can all get quite complicated when comparing alternatives. It becomes difficult to compare proposals on an apple-to-apples basis. In fact, it can even become difficult for an inexperienced tenant representative to decipher the various costs involved in comparing different office space alternatives.

First of all, there are different lease types including full service, gross, semi-gross, net, triple net and other variations which specify which, if any, expenses the tenant pays.

How about the base year for operating expense pass throughs? This is the base year amount of operating expenses that your additional costs are based on. If you don’t pay attention or don’t know you could find yourself liable to pay for increases over a base year that could be 5 year old and cost you several dollars per square foot right off the bat. What if the building is only 25% occupied? Who will pay for the operating expenses on the vacant space? What is the norm for your market?

If your lease is a triple net lease are the expenses in line with what could be considered normal in your market or are they somehow higher due to extra landlord fees?

There are also different levels of tenant improvements which can be included in the lease. Landlords will very often offer a per square foot allowance for tenant improvements. Is this on the net rentable space or usable area or is it from shell condition or below the ceiling?

Another big one could be the load factor in calculating useable vs. rentable space measurement. It is the percentage of space on a floor that is not usable plus a pro-rata share of the building common area, expressed as a percent of Usable Area. It is also known as the Common Area Factor or the Loss Factor. A Typical load factor range is 10% to 18%. Some inefficient buildings can have load factors as high as 25% or more. Once again, what is the norm in your market?

The answers to these questions can make a significant difference in the overall cost of renting office space. Which is why making mistake number one in this series can be so damaging. Understanding all of the leasing costs and being able to communicate that information to you is an important part of what a tenant representative does. It can save you thousands of dollars in avoiding mistakes. Tenant representatives provide many more services to their clients and there is no cost to you in engaging their services. It costs you nothing, but can save you thousands.

Biggest Mistake Made By Tenants
Second Biggest Mistake Made By Tenants

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1 response to “Third Biggest Mistake Made By Tenants”

  1. Houston Apartment Locator Says:
    hey,
    it is really a important thing you should be very careful before making these decisions.