cre

How CREA and the MLS are destroying commercial real estate through DDF

If you are a commercial real estate agent and you use the MLS, you may have noticed an unsettling trend in the last few years. CRE brokers are accustomed to having a particular flow to their deals that are unique and more elaborate in comparison to most residential real estate transactions. We are also accustomed to working both ends of a deal, especially when it comes to leasing. We have knowledge of how to complete these transactions with professionalism, transparency, and without assistance.

In recent years CREA has implemented DDF (Data Distribution Facility) to all MLS listings by default, unless your board office allows you to disable it at the brokerage level, many don’t. Why is DDF damaging to the commercial real estate profession? DDF allows any brokerage utilizing the MLS to market your listing, without additional consent from you, automatically. While this allows for more exposure of one listing on the internet, it’s a double edged sword that has led to incompetent representation for commercial buyer/tenant leads. Brokerages that are all or mostly residential focused are now getting buyer and tenant leads for commercial real estate listings they don’t have, and more importantly, don’t have the experience or expertise to properly represent someone in a commercial real estate transaction.

A few years ago I operated a small but profitable commercial real estate brokerage. My desire to focus on dealmaking rather than broker of record responsibilities lead me to the decision to close shop and join another brokerage. I was accustomed to operating strictly with commercial standards and it was rare for me to encounter a deal with another agent who wasn’t a commercial practitioner. These days my MLS listings barely generate direct leads for me, instead I’m regularly bombarded with showing requests from residential agents who have received a random lead and don’t know how to handle it. The vast majority of real estate practitioners are residential, with little or no experience to properly complete or even offer good advice for a commercial lease or sale transaction.

When commercial realtors encounter a residential agent with a buyer or tenant, it’s usually an incredibly frustrating experience to try and complete a deal. I for one often observe agents that:

-Don’t know anything about their clients needs or business requirements before showing a property.

-Don’t know the market conditions for commercial, office, or industrial properties.

-Know little or nothing about environmental site assessments.

-Don’t know what BOMA is or how to measure a building according to its standards.

-Make interior measurements and assume the landlord is trying to charge for extra square footage.

-Don’t know how to write a commercial offer to lease or commercial agreement of purchase and sale.

-Have never written, negotiated, or read a commercial lease.

-Can’t calculate the monthly rent.

-Don’t understand what TMI is.

-Misrepresent their clients interests because they simply don’t understand them.

-Can’t answer basic CRE questions and needs to consult their broker of record or another agent in their office for answers.

This list can unfortunately go on and on.

What this leads to is the public being misrepresented when they are accidentally matched up with someone who simply isn’t qualified to complete a commercial transaction and I have heard complaints from businesses who had incredibly frustrating experiences and difficulties as a result. Unfortunately I’ve raised concerns with CREA about this platform and there seems to be no concern about ensuring that people are matched up with quality commercial practitioners for their business needs, and there seems to be no concern for commercial practitioners unique business model.

Is there a solution? As long as the MLS is being used and has DDF implemented it will continue to degrade the commercial real estate profession at a rapid pace. Maybe it’s time commercial practitioners acknowledge the harm that is being caused to this industry and pursue an alternative. CREA has designed the MLS to cater to the housing industry and over the years have continuously failed to improve the commercial real estate sector. What if all commercial practitioners abandoned use of the MLS in pursuit of an alternative such as Loopnet or Spacelist to be the new norm? That’s a conversation worth having.

Until then, if you’re a business owner in need of commercial real estate services, just make certain that you’re dealing with an agent that’s qualified to represent your interests.

What is Base Rent in a Commercial Real Estate Lease?

Base rent, (may also be referred to as net rent) is the base lease rate a tenant pays for a commercial, industrial, or office space in a building. The base rent is net of expenses and percentage rents. What this means is that the base rent is not a representation of the total monthly rent a tenant will pay. Confusing? Possibly if you’re new to it.

As mentioned above, base rent is net of other expenses such as utilities, property tax, property maintenance, and property management etc... In commercial real estate leases it’s common practice for the tenant to pay for their share of other property expenses through additional rent commonly referred to as TMI. That means in order to see the whole picture of what your monthly rent will be you need to combine the base rent and additional rent. If you’re still confused I have another blog that explains how to calculate the total monthly rent here.

If anyone is confused over the rent structure in my listings I’m happy to provide clarification.

What is the difference between a Gross and Triple Net Lease in Commercial Real estate?

If the pricing for commercial real estate isn’t confusing enough for businesses looking to lease space for the first time, wait until you find out there is more than one type of lease you can sign, but that’s usually decided by the landlord.

The majority of the time commercial real estate landlord’s prefer to operate with some form of triple net or net lease (covered in another blog) which requires the tenant to pay for property expenses in addition to their base rental rate. A gross lease is probably more familiar to tenant’s approaching this for the first time, but don’t expect a landlord to use this type of lease. A gross lease is usually a monthly flat rate that not only includes the base rent but some or all of the property expenses as well. This is an easier option for tenant’s to understand but why is it not an option for most buildings?

The vast majority of commercial real estate landlord’s prefer to operate with a triple net lease if the building allows for it, most do. This allows the landlord to keep its net rental income separate from the property expenses which are paid for by the tenant through an additional rent commonly known as TMI, it also allows landlord’s and tenant’s to see clearly how the base rental rate compares to similar buildings in the market without property expenses clouding the comparison. Some property expenses (but not necessarily all, gross leases vary case by case) that might be grouped into a gross rental rate might be property taxes, building insurance, utilities, property maintenance, service contracts, property management etc.

As mentioned above the vast majority of landlord’s will use some form of triple net lease and a tenant should be prepared to know what that entails. Although a gross lease is easier to understand from the tenant’s perspective, don’t expect a landlord to agree to use one unless there is a unique building/situation that warrants it. For anyone that might have questions about gross and net leases I’m open to answering some questions.

Commercial Real Estate Lease

Commercial Real Estate Lease

St. Catharines Industrial Base Lease Rates Surpasses $8 per sq. ft.

If you’re an industrial tenant coming out of a long term lease wanting to know your relocation/expansion options, there is probably a bit of a shock when you check to see what’s out there and the price tag that comes with it. Not only has inventory dried up, but rental rates have risen drastically, by 30-40% in the last few years. What should you be expecting?

St. Catharines still with the highest demand now has industrial inventory leasing at least $8 per sq. ft. for a quality building. Other municipalities in the region have also had significant increases, so it’s not as if you can avoid new market rental rates. Some industrial buildings have achieved $10 per sq. ft. or higher if they are perceived to have premium location and features.

If you’re wondering if there will be an end in sight to these industrial market conditions, we aren’t seeing it at this time. In order for there to be relief in rental rates either something catastrophic needs to happen to the market that causes a lot of businesses to fold, or a significant amount of new inventory needs to be added. While there is turmoil in global markets due to the threat of trade wars we currently aren’t seeing activity that would be alarming to Niagara’s industrial real estate market. As for adding inventory it’s just not happening due to the current cost of construction. As costs for building continue to increase, it makes it more difficult to justify as the return on investment isn’t high enough to support it.

My advice to tenant’s concerned about these market conditions is to start looking at your relocation options early, with a local industrial real estate broker, and be prepared to act quickly.

Opportunities for Cannabis Retail Space for the Next Lottery Draw

It’s time for the second wave of the Ontario cannabis retail lottery which is to be drawn in August 2019. Much like 6-8 months ago, this already has thousands of retailers looking to tie up a commercial retail space for lease and we are receiving inquiries every day from potential cannabis retailers.

With the rules of the lottery being known in advance this has forced retailers to be more selective of the properties they pursue for submission. We still expect landlord’s to potentially want some form of compensation for tying up the unit, and, with the abundance of retailers trying to compete the landlord is going to pick the tenant that caters to their interests the most… just something to keep in mind (you retailers know you have a lot of competition right?).

We currently have a limited number of retail listings available in St. Catharines of the Niagara Region that may be suitable for cannabis retail, below is information and links for each.

One of the most desirable retail locations in the city of St. Catharines is Fourth Avenue. With the high traffic count, amenities, and nearby highway access this is a very desirable area of the city. The two listings we have available are in the links below:

http://www.remaxnc.ca/listings/commercial-office-retail/lease/78933

http://www.remaxnc.ca/listings/commercial-office-retail/lease/78762

With highway exposure and make a little bit of cosmetic improvement you could have retail space with QEW highway exposure at 10 Dunlop.

http://www.remaxnc.ca/listings/industrial-retail-warehouse/lease/78886

This last one is located in the West end of St. Catharines and is in close proximity to the Go Train station, just in case you want a store that can cater to commuters ; )

http://www.remaxnc.ca/listings/commercial-office-retail/lease/78932

Feel free to reach out and ask questions about the properties. If you’re a cannabis retailer looking to lease retail space within the city let us know if these locations are worth submitting as soon as possible.

Industrial Space for Lease in St. Catharines - 330 Vansickle Road #2

Industrial Space for Lease in St. Catharines - 330 Vansickle Road #2

Industrial space for lease in St. Catharines - 330 Vansickle Road #2. Unit consists of front showrooms, two washrooms, mezzanine, and warehouse with grade level door access and 18 ft. clear height.

What is a Default Notice in a Commercial Real Estate Lease?

A default notice is a document served to a tenant or landlord to notify them that they have not complied with one or more obligations in their lease. Something important to note about a default notice is that it is NOT an eviction notice, but it would be unwise to ignore it because the consequences could be significant. The purpose of the document is to let a party know what the particular problem is and a time frame in which it needs to be remedied. If the problem isn’t remedied within the specified period then action may be taken. What sort of action is taken? That depends entirely upon the scenario and the way the lease is written.

The most common default notice is served to tenant’s is for non-payment of rent, however, there are many more reasons a tenant may receive such a notice. To name a few other potential issues that could require a default notice would be to repair damage caused to the property by a tenant, to comply with parking requirements as per the lease, to cease an activity that isn’t permitted in the lease etc. The type of action that would be taken by a landlord if a tenant doesn’t remedy a default really depends on the scenario and the wording of the lease, but, failing to remedy a default that a landlord considers to be a serious issue could have some significant consequences such as eviction and/or legal action. If you have been served a default notice by your landlord it would be wise to start some dialogue as you work towards your solution. Ignoring such a notice would give the landlord the impression you aren’t even making an attempt to correct the problem which would likely motivate them to take serious action at the earliest possible opportunity.

Can a Landlord be served a default notice? Yes. While most commercial leases are worded to be pro-landlord (because it’s their property) there should be wording that also protects the tenant to ensure the property functions as it should in order for the tenant to operate their business as intended. An example of a default notice a tenant can serve the landlord is if a landlord has not completed work stated in the lease, for example if the landlord fails to install roughed in plumbing they promised in the lease then the tenant can service notice to the landlord to remedy that. The types of action a tenant can take if a landlord defaults varies depending on the type of issue and the wording of the lease.

While there are many reasons a default notice can be served, it shouldn’t always be the first action taken especially for non-serious issues. Most times some regular communication between landlord and tenant can prevent problems from forming to begin with and having that kind of landlord/tenant relationship is ideal to maintain if possible.

Industrial Building for Lease in Beamsville - 4306 Bartlett Road

Welcome to building B at 4306 Bartlett Road in Beamsville, Ontario. The location is minutes from nearby highway access at QEW and Ontario Street, and, Beamsville is a great in between market for industrial or warehouse tenant’s that cater to both Niagara as well as Hamilton and GTA markets due to it’s proximity to both.

The building itself features a very wide grade level door, a common loading dock, and approximately 16 ft. clear height. The building is expected to be available for occupancy around October 1, 2019 after the current tenant vacates and the landlord can complete some work on the building.

Prior to occupancy the landlord plans to insulate the building, bring in a bathroom, and equip it with a 3 phase power supply. For tenant’s that don’t require some of those features or are willing to use common washrooms instead we can discuss some flexibility in the rental rate.

Industrial buildings for rent in Niagara this size with a loading dock really don’t last long on the open market, especially at these rental rates. It would be ideal to act quickly before someone else takes, space like this is in high demand. Contact me if you have questions or interest.

Industrial Building for Lease in St. Catharines - 101 Hannover Drive

Another rare listing of industrial space under 10,000 sq. ft. is officially on the market and available next month. 101 Hannover has 5600 sq. ft. of warehouse space coming available which can be combined with the office unit at the front of the building.

The building is located on Hannover Drive, just off of Martindale Road and QEW highway interchange for close highway access. The location is arguably the nicest business park in the city, offering convenience for many amenities an industrial tenant or its employees may need. The building is well constructed with brick and concrete block construction. Though the parking lot is currently adequate the landlord is prepared to expand it for uses that require additional parking spaces.

Inside the space is open concept with only one column approximately in the middle of the unit. Interior features consist of 18 ft. clear height, radiant heat, a grade level door, two washrooms, and an entrance area with window display.

This unit will not last long on the open market due to the demand for space this size. It would be wise to act quickly if you think this building can meet your criteria.

Commercial Space for Lease in St. Catharines - 225 St. Paul Street West

Welcome to 225 St. Paul West, St. Catharines, a building with a nice updated stucco exterior for your business to make a great first impression with. There is plenty of on-site common parking right out front, the lot was recently re-paved too. For retail or food service tenant’s there is ample exposure with expansive window display.

Inside the space feel well lit from the expansive window space. The unit is open concept and cater to a variety of professional uses such as office, retail, medical, service, and food service. The ceiling height is approximately 12’ but there is a drop ceiling at a lower level. The rental rate for the entire space is $12 per sq. ft. for the base rent and $4 per sq. ft. for the TMI. Depending on the tenant the landlord may consider splitting the unit into approximately 1500/2000 sq. ft. units but the asking base rent would be up at $17.95 per sq. ft. instead.

To discuss the opportunities to lease this commercial building please contact me.

What is a rent free period in a commercial or industrial real estate lease and how do you achieve one?

A commonly requested or negotiated item in commercial real estate leases is a rent free period. Depending on market conditions for the type of space or building you’re looking to lease you may be able to achieve one.

A rent free period is a defined period where the tenant does not pay rent either prior to their lease term or at the start of their lease term. How much rent free to ask for is usually dependent on market conditions and the reasons for needing a rent free period. For Example, an office or industrial tenant looking to build out a new floor plan of offices might need 2 months to complete the work at their cost, and in turn would ask if they could achieve two months rent free to make the transition smoother. A landlord might see this as a reasonable request dependent on market conditions and the length of the lease term.

Speaking of the lease term, a rent free period is usually not considered unless you are signing a longer term lease, which in current market conditions is usually around 5 years depending on the landlord, property, and the reasoning. If you are not prepared to offer a lengthy commitment, it would be wise to not request a rent free period as you would be seen as unrealistic. It would also be wise to not request too much rent free period for the same reason unless it’s a very unique deal that warrants it.

There are also different options for a rent free period. In the situation of a triple net lease for example, some landlord’s may only agree to giving base rent free, meaning the tenant would still pay their proportionate share of property expenses through TMI, CAM, or additional rent depending how the lease is worded (this is common practice and considered a reasonable request).

There is also the option of having a rent free early occupancy period or a rent free period at the beginning of the lease term. If your lease starts February 1, 2019 and you have one month rent free early occupancy, your rent free period would be for the month of January before your lease starts. If it is rent free within the lease, it would likely make February the month you have free. What is agreed is usually a matter of preference between landlord and tenant. For landlord’s, it’s usually more of an advantage to have rent free early occupancy because if you have a 5 year lease, you still get the full 5 year term whereas with rent free within lease, the beginning of the term is eaten up with the free period.

A rent free period is a common negotiating tool for commercial, industrial, and office building leases, but it has its limitations in many markets and not all landlord’s consider it. Because it’s an incentive there may also be a claw back clause in the lease for that incentive in the event the tenant defaults. If the landlord agrees to a rent free period it’s because they feel there is a legitimate reason for the timing of the request and that it benefits their long term big picture of their investment property.

In the current Niagara industrial market, in particular St. Catharines, space is tight so rent free incentives usually aren’t very long if considered. Rent free on a commercial retail space is dependent on building and scenario and office buildings usually have consideration for it if the tenant intends to do their own improvements and alterations to the space.

To make sure you’re getting the best advice on rent free incentives, make sure you’re speaking with a knowledgable commercial real estate broker for the market that you are in.

Are you an industrial tenant that can't find a building in Niagara?

If you’re an industrial tenant in St. Catharines or Niagara looking on commercial listing websites and noticing nothing with your criteria is coming up or if you’re calling real estate offices with similar results, that’s likely because there aren’t any… at the moment.

The best thing you can do is speak with a reputable commercial real estate broker and let them know what you are looking for and how long you can wait for it. I have conversations daily with tenant’s expressing this frustration, but, sometimes there is a solution if you talk to the right people. I have a database of properties that have leases coming due on the regular. Sometimes I have a creative solution. A conversation with the right commercial real estate broker can make a difference.

I had a conversation with an industrial tenant the other day discussing their timing and expansion options. I happened to make them aware of a building we can pursue in a few months with expansion options a year from now, an option he wouldn’t know about unless that conversation happened.

Right now I’m keeping tabs on the tenant’s looking and when availabilities come up I like to make them aware of it. If you want to be one of the tenant’s that benefits from opportunities that can be created by a commercial broker, please contact me. Don’t expect residential Realtor’s to be of the same level of assistance, their knowledge is usually limited to what is available right now, which isn’t much.

What is a Commercial Real Estate Lease Assignment?

Yesterday I wrote a blog about subleasing in commercial real estate which is usually the most common option when the space or unit is no longer needed by the tenant for various reasons. Today I want to touch on the other option which is commonly referred to as a lease assignment.

If you read my blog on subleasing you would notice that I mention that the original tenant still remains on the hook to fulfill obligations of the original lease in that the sub-tenant pays the tenant and the tenant still pays the landlord in addition to fulfilling other obligations in the document. The difference with a lease assignment is that it usually releases the original tenant from its obligations to the lease. While this may sound like the more attractive option from the tenant’s perspective, it’s not always an option on the table and it’s often not the preference of the landlord. In the lease assignment one tenant assigns all responsibilities of the lease to the new tenant, letting the original tenant off the hook. The new tenant would have a direct relationship with landlord going forward.

So what are some reasons that a lease assignment would be preferred over a sublease? As mentioned above the first choice and sometimes the only option a landlord wants to give is the option to sublease. In the eyes of the landlord they have an existing relationship with the current tenant so they may not feel comfortable working with a lease assignment. Reasons for a landlord to consider a lease assignment instead of a sublease is because there may be an opportunity to achieve higher rents with the newer tenant, or the newer tenant may appear to have a more solid financial backing (such as a well known national franchise) vs. a mom and pop business that is going out of business. It’s obvious the landlord would want to form a direct relationship with a tenant they perceive to be a better fit for the building and their investment goals.

If you’re a landlord or tenant who has encountered this situation and don’t know what’s best, weigh the pros and cons of either and it should be clear what is best for the scenario.

What is a Commercial Real Estate Sublease?

Sometimes a tenant can’t fulfill its obligations to complete its lease term. The reasons a company could entertain subleasing their space is they may have outgrown it and needed to relocate, there may be cutbacks and a need to downsize, Corporate office may decide that a location is no longer needed or it needs to be relocated, or the tenant may be going out of business. Regardless of the reason, most leases contain an option to sublease, also known as sublet.

What is a sublease? Subleasing allows the tenant to lease to a sub-tenant for some or the remainder of the lease term to reduce the financial burden of paying rent on a space that is not being used. With the options mentioned above a company or an individual that signs a lease is obligated to fulfill it to the end of its term. For example, if a tenant signs a 5 year lease and can’t fulfill beyond 3 years, they could opt to sublease the unit for the remaining two years.

There are some things to keep in mind when subleasing so it’s best to read your lease and know what your options are. The positives of subleasing are obvious in that you can relieve financial burden on paying for a space that isn’t needed anymore. Some of the negatives are finding a sub-tenant which is not always quick or guaranteed, not being offered the full rent by a sub-tenant, being potentially responsible or liable for the sub-tenant, and in most cases you are still on the hook to fulfill your obligations of the lease even though someone else is using the space now. That last point is of particular concern because the original tenant may not realize its subleasing obligations under the lease. Even though there is a new tenant using the space, that new tenant pays you rent, you in turn are still obligated to pay the landlord your rent and you are still obligated to ensure the lease is complied with.

There are many more aspects to subleasing and if it becomes an option you want to consider, be sure to connect with a knowledgable commercial real estate broker in your market to ensure you know your options.

In some situations there may be potential to assign your lease instead of subleasing but I’ll be covering that in another blog. Keep in mind a sublease can be entertained on just about any commercial property whether it be office, industrial, retail, medical, etc.

2019 Industrial Lease Rates for St. Catharines

In the last year industrial lease rates have once again soared past expectations. This is what happens when business is good and there aren’t enough buildings to house everyone.

For those curious, this is a very general approach to industrial building lease rates in St. Catharines. In the East end of the city, quality B class buildings will start around $6.50 per sq. ft. for base rent, $7+ per sq. ft. or higher can be justified for A class. For the West end of the city B class would start around $7 base rent and A class industrial buildings are now achieving over $8 per sq. ft. and might creep closer towards $10 if things continue at the rate they do.

To ensure that you are paying market rental rates it would be wise to enlist the services of a commercial real estate broker that not only possesses that knowledge, but also knows when and where to find the building or space you need for your business.

Niagara Spring 2019 Industrial Market Update - There is no small space

Industrial Warehouse

Industrial Warehouse

As vacancy shrinks and rental rates rise in this crazy industrial market, it’s important to keep these conditions in mind as you search for industrial buildings or space for lease for your business. This blog applies to all of Niagara, especially St. Catharines.

If you’re looking for something under 10,000 sq. ft. start looking very early and be patient. Speak with knowledgable industrial brokers with their ear to the ground and may be able to make you aware of a coming vacancy months in advance.

If you’re looking for a space under 5000 sq. ft… good luck. At the moment there is either none or very few viable options available. You will need to be patient, and, if a vacancy comes on the market be sure to jump on it as soon as possible assuming you will have competition. Don’t assume there’s desperation from the landlord, there isn’t. It’s a landlord’s market so be sure to approach the situation in that way.

For tenant’s looking to get on a wait list for listings as they come available, please contact me to see what your options are.

What expenses can be used in TMI, CAM, or Additional Rent in a commercial real estate lease?

What should be used as a TMI expense is dependent upon how the lease is written, but, the vast majority of the time I write triple net leases and I know most commercial and industrial landlords and practitioners prefer triple net leases where they can be applied, The list below is based on a triple net scenario and isn’t limited to what is listed:

1) Landscaping - The property needs to look well maintained to make a good first impression in a business situation. Lawn cutting, gardening, weeding, tree and bush trimming, litter pick up, and so on can be a landscaping expense.

2) Snow Removal - If you live in a province or state that gets snow, snow removal contracts are a necessity for commercial and industrial properties to ensure businesses and customers have a place to park. Salting and Sanding also falls into this category.

3) Parking Lot Repairs - Parking lots function and look best when the pavement is smooth and free of potholes.

4) Roof Repairs and Maintenance - There are various things that can cause a leak in the roof but leaks tend to occur most towards the end of the roof life. Fortunately repairs can be made and the roof can often be functional for years longer with proper maintenance. There will reach a point where repairs won’t work and a full replacement will be necessary.

5) HVAC Maintenance and Repairs - To ensure the longest life and most efficiency of your HVAC units you should have a regular maintenance contract. A few visits a year from an HVAC technician to keep the unit clean and running smoothly is a wise idea.

6) Outdoor and Common Area Lighting Costs - Tenant’s and Customers definitely appreciate it when coming and going during darker hours of the day, and, having a lit building is a bonus security feature.

7) Property Management and Administration Costs - Property management takes time and money. It would be rare to see management fees higher than 15% of the property expenses but this depends on the landlord and management company.

8) Elevator Maintenance - Elevators require monthly maintenance contracts to remain operation.

9) Waste Removal - If you have common waste, recycling, or compost bins for tenant use.

10) Outdoor/Common Walkways, Ramps, or Stairs - Need to be maintained to code for safety.

11) Fire Prevention - For buildings with sprinkler systems, common area alarms/detectors, these are items that have maintenance costs. Depending on the situation, most times tenant’s would have alarms/detectors in their own units at their own expense.

12) Security Systems - For common areas only. Tenant’s should do their own monitoring for their own unit.

13) Electrical - Maintenance of the electrical room or main transformer.

14) Water - Most units of commercial and industrial buildings don’t have a separate water meter. Water costs should be added to the TMI in this situation, except if there is evidently a tenant that uses more than the others, a fair approach to billing should be made.

15 Insurance - For building and land. Tenant’s should be providing their own content and liability insurance as per the lease.

16) Property Taxes - The largest and most obvious expense.

This list can and will be more extensive in the future, but for now this is a good base guide.

Depending on the wording of your lease you may be able to amortize capital improvements over a longer term. The default wording of my lease allows for roof, HVAC, and parking lot replacement costs to amortized over 10 years but this isn’t used in all documents.

If you’re a client of mine that needs some assistance with best TMI practices I have no problem offering that help. Make sure you work with a Realtor that knows all of the expenses that need to be accounted for.

How to Calculate TMI ,CAM, or Additional Rent on Commercial and Industrial Buildings

This blog is targeting commercial and industrial buildings that have little or no common area. Most commercial retail plazas and most industrial buildings will fall into this category. Office buildings, or buildings with an abundance of common area would usually take a different approach which I plan to cover in another blog. If you’re new to this TMI, CAM (common area maintenance), and additional rent are industry phrases to represent the expenses for the property, and whatever phrase is used is usually a matter of preference but TMI is most common.

T.M.I. stands for taxes, maintenance, and insurance so the first place to start is adding together your property taxes, all of your maintenance and repair costs on the property, and your insurance costs for the most recent year. That makes up your combined annual total of property expenses. You simply need to divide that total by the total number of square feet that make up the building. You then have your per. sq. ft. rate for TMI.

A simplified formula: (Property Taxes + Maintenance + Insurance) ÷ total square feet = per sq. ft. TMI rate

If you’re looking for information on what TMI is (also known as CAM or Additional Rent), you may want to visit my other blog post with that explanation here https://www.stevendavidson.ca/blog/2018/8/13/what-is-tmi-cam-and-additional-rent-in-commercial-real-estate-leasing

For information on how often your TMI should be calculated I have a post about that here: https://www.stevendavidson.ca/blog/2019/2/12/how-often-is-tmi-cam-or-additional-rent-updated-in-a-commercial-real-estate-lease

If you were looking for information on how to calculate month rent instead of TMI I have information on how to do that here: https://www.stevendavidson.ca/blog/2019/2/22/how-to-calculate-monthly-rent-for-commercial-real-estate-lease-listings

The Tourist Commercial Real Estate Areas of Niagara Falls

Niagara Falls is a landmark known by most of the world, and as such, there is obviously tourism around it.

One of the most well known commercial real estate areas for tourism is Clifton Hil, a short street that connects Victoria Ave to Falls Ave/Niagara Parkway. Clifton Hill is known for its over the top architecture, large colourful displays, funhouses, entertainment, and food. In peak season Clifton Hill is crowded with vehicle traffic and pedestrians traffic. At the bottom of Clifton Hill is Falls Ave. and Niagara Parkway which are a short distance from the Horseshoe Falls viewing areas, you’re also right next to the Rainbow Bridge to cross into the United States.

The tourist district expands Southwest from Clifton Hill up Victoria Avenue and although Stanley Avenue sort of acts as a border to the West, Victoria Avenue clearly has businesses that look to draw in tourist traffic past that, up Ferry Street, and even a considerable distance down Lundy’s Lane.

The Tourist Area travels some distance to the South Along Fallsview Blvd and Stanley Ave but it tapers off once you pass the Fallsview Casino and the falls itself.

The rents in the prime Tourist areas surrounding Clifton Hill are not a reflection of commercial real estate rents elsewhere in the city. Tourist area rental rates are usually AT LEAST triple compared to most areas, for the obvious reason of catering to high traffic tourism.

If you think your business might be a good fit for the prime tourist areas of Niagara Falls, be sure to connect with a commercial real estate broker who is knowledgable with the area and can act quickly as vacancies are rare.

The Industrial Real Estate Business Parks of Niagara Falls

While it may be known for its tourism, Niagara Falls is the second largest city in the Niagara Region and has a healthy amount of industry in their commercial real estate sector. An attractive feature about being in Niagara Falls is that it has its own border crossing at the Rainbow bridge, convenient for businesses that export to the United States. While Niagara Falls may have industrial properties throughout various areas of the city I’ll make mention of the commonly known ones below.

On the West side of the QEW highway and filling out to Montrose Road is a strip that runs through most of the city which is made up of mostly industrial properties, some with highway visibility. Conveniently located with easy access to the highway, this business park is great for truck access.

In the South East end of the city there is another major industrial park off Stanley Avenue which spans closer to the highway and Dorchester Road. While it may be more tucked away than the industrial park on Montrose, this location of the city is still accessible for trucks but a bit removed from the highway so lease rates may be a bit more competitive in comparison.

Like Niagara on the Lake, Niagara Falls is also close by alternative market to St. Catharines for industrial operations, depending on your needs. To ensure you’re getting the best opportunity for industrial leasing in Niagara Falls, be sure to work with an agent that has extensive knowledge and experience in industrial real estate for the area.