Two spaces can quote the same rent and end up costing very different amounts. The difference is in the lease structure and a handful of clauses most people skim. Here is what to check before you compare offers.
Know the lease type
| Lease type | What the rent includes | What you pay on top |
|---|---|---|
| Full service gross | Rent plus most operating costs | Usually little beyond increases over a base year |
| Modified gross | Rent plus some costs | Whatever the lease assigns to you, often utilities and janitorial |
| Triple net (NNN) | Base rent only | Your share of property taxes, insurance and common area maintenance |
Industrial and retail space is usually quoted NNN, while office is more often gross or modified gross. Always convert offers to the same basis before comparing.
What CAM really covers
Common area maintenance can include landscaping, parking lot repairs, security, management fees and sometimes capital repairs. Ask for:
- Two or three years of actual operating expenses, not just this year's estimate.
- A cap on controllable expenses, so management and maintenance cannot jump without limit.
- Exclusions for capital items such as a new roof, or amortization over their useful life instead of a single year.
- Audit rights on the annual reconciliation.
Clauses that change the math
- Annual escalations. A fixed bump every year compounds over a five or ten year term.
- Free rent and tenant improvement allowance. These lower your effective rent and should be part of every comparison.
- HVAC and roof responsibility. In many NNN leases the tenant maintains or even replaces HVAC units, which can be a real cost.
- Restoration clause. You may have to remove your improvements when you leave.
- Personal guarantee. Try to limit it by amount or let it burn off over time.
- Renewal options and assignment rights. These protect your location and make your business easier to sell later.
For industrial users: specs are cost
Clear height, power, dock doors, truck court depth and yard space decide whether a building works for you. Paying a little more for the right specs is often cheaper than working around the wrong ones.
Compare on effective cost
Add base rent, estimated NNN charges and your share of any repair obligations over the full term, then subtract free rent and improvement allowances. Divide by the months in the term. That effective monthly cost, not the headline rate, is the number to compare.