office

Why are Commercial, Industrial, and Office real estate leases so long?

“Why is this lease so long?”, “Is all of this wording really necessary?”

I get questions like this from either new businesses, or businesses that have come from a building that simply had a very relaxed leasing policy. More often than not, a relaxed leasing policy and short lease documents that lack detail cause problems.

A commercial real estate lease should be very detailed about the relationship between landlord and tenant. Not only should it contain important details about the deal such as lease term, start date, rental rates, size of premises, use, etc, but it also needs to have details about rules on the property, insurance requirements, types of action that can be taken in the event of a default, environmental responsibilities, and so on. The list is actually quite extensive for what can be contained in a commercial real estate lease which is why most documents are dozens of pages in length. My document often ends up between 30-35 pages depending on the tenant, building, landlord, type of lease, zoning, etc. While many tenant’s may think that’s a long document, I feel each point is necessary and would have difficulty shortening it. I would actually have an easier time finding content to add than take away.

Back to the questions, why are leases so long and is it necessary? If a tenant asks that question and I look at the building they’re in, I likely see issues such as poor maintenance, poor parking arrangements, structural issues, driveway pothole and access issues, and tenant conflicts. A properly written lease document that can address those issues and is enforced by the landlord and tenant ensures fewer issues for both parties. A lengthy lease should be considered as necessary by both parties because leases should be designed to protect the interests of both landlord and tenant. Yes, leases by default are naturally pro-landlord, but that’s because it’s their property. That doesn’t mean there isn’t or shouldn’t be protection for tenant’s so that is something you need to look for and ensure is in your lease. The landlord’s I represent take good care of their buildings because the lease requires them to. This allows the tenant’s to use the property as efficiently as possible to run their businesses, as long as they follow the rules with the other tenant’s. This is the ideal situation for everyone.

Every clause in my lease has a reason and my document is updated when new industry trends occur or new issues are discovered in the marketplace. Each clause has a purpose because at one point it was created to correct a problem or properly define something.

So is all that wording necessary? Absolutely. As long as it reflects the needs of your business and protects the interests of both parties, every clause should be seen as necessary and relevant. Make sure you are represented by a knowledgeable commercial real estate broker to ensure you get what you need from your lease.

Small Office or Institutional building for sale in St. Catharines

Behold 172 Eastchester Ave in St. Catharines with a recent price increase due to the amount of activity. A clean and well maintained small building used for office or institutional uses in the East end of the City. The building has been previously used as a private career college and a church but it can be converted to offices, medical, educational, or other uses.

What makes 172 Eastchester so special? Aside from being well priced at under $200 per sq. ft., this building features 17 on-site parking spaces plus additional free street parking, it has large bay windows that bring in amply natural light, it has a finished basement for more usable space, and it has an elevator which can be re-instated with the implementation of a regular maintenance contract. These are all rare to find features, especially at this price point.

If you are in the market to buy a small office building you will want to check out this listing. Looking for something else? Let me know what you need and I’ll see if I can find an option somewhere by contacting me

The Office Building Parks of St. Catharines

St. Catharines has historically been a blue collar town, and while there have been some changes in industry, especially since the 90's, it still very much holds it's blue collar feel. With that in mind, we have a relatively small office building market to tap into.

The most prominent and accessible area for office space can be seen from the QEW as you pass through the Martindale Road area. Here there is a mix of low and mediums rise office structures that line Martindale and Hannover Drive. Base rental rates to lease in this neighbourhood start around $12 per sq ft but if you are looking to get into a newer building, you can easily start over $20 per sq ft.  This is often seen as the most desired area for office space in the city.

 The second most known office market in St. Catharines is downtown, which in recent years has had quite a face lift with infrastructure, a new arena, and a Centre for the Arts. Downtown has proven itself to be a good source for food and entertainment but with its mostly outdated office towers and lack of convenient and cheap parking it has gained little traction to attract and retain office/commerce businesses. Office space for lease in this neighbourhood can be found with base rents as low as $8 per sq ft, averaging around $12, and some planned developments are offering space over $30. There are plans for multiple developments involving office towers but time will tell if these buildings ever fill up. In my opinion downtown could/should transform some of it's outdated office structures into non-student housing to mix up some of the demographic living and working in the city core.

 The last known office market is on Queenston which has been quiet in recent years as the hospital relocated from this area to the West end. Back in the day this is where nearly all of the city's medical practitioners were located but it's currently a depressed neighborhood in the starting stages of redevelopment, likely to affordable housing and mixed uses.

 It's important when searching for office space in this city that you select from a building and location that is suitable for your business and your employees. Be sure to enlist the services of a Realtor that has ample knowledge of the local office market to ensure you're making the right decision for your business.

What is TMI, CAM, and Additional Rent in Commercial Real Estate Leasing?

If you're new to commercial leasing you are likely surprised by the way most commercial, industrial, or office spaces are priced and marketed. Most commercial listings have the price broken down per sq. ft. and while that may be confusing in itself, what I find catches most people off guard is the mention of additional rent which is also commonly referred to as TMI (taxes, maintenance, insurance) or CAM (common area maintenance). It's often an overlooked detail in the hunt for commercial space because a new tenant may notice the base rent is within their budget but after discovering additional rent the space is not affordable.

So what is this additional rent? It's the landlord's expenses for the property.

What are the landlord's expenses? Property taxes are usually the most significant of this figure but it also includes but isn't limited to property insurance, landscaping, snow removal, waste removal, cleaning and maintaining common areas, building management and administration fees, and repair and maintenance for items like the roof, HVAC, etc.

Why is additional rent separated from the base rent? Keeping the base rent separated and priced per square foot makes it easy to compare against competing spaces to determine what is in line with market value, this benefits both landlord and tenant.

Why do tenants pay additional rent for the landlord's expenses? I've been asked this a few times as if this is a deceiving practice but it isn't. The tenant pays their proportionate share of the property expenses because it's the tenant's that use the property, not the landlord. The tenant's use the structure, the HVAC, the parking lot, the common areas etc. and those items need to be paid for and maintained. Logically it should be the party that uses it that pays for it and that is why the expenses to maintain the property paid for by the tenant usually through TMI.

How is TMI/additional rent calculated? In most scenarios the combined annual total for expenses is divided by the total number of square feet of the building. This provides the per square foot rate for expenses we call additional rent, AKA, TMI or CAM. This per sq. ft. figure is multiplied by the number of square feet that make up the tenant's premises and that is the annual total the tenant is responsible for paying as additional rent.

Does TMI change or increase? Yes. I mentioned above property taxes usually make up the bulk of additional rent and unfortunately property taxes have a tendency to increase regularly. In addition to this the cost of maintenance and repairs also change over time and will have an impact.

Is additional rent negotiable? No. Property expenses are not negotiable. They are what they are.

Have a question about additional rent that isn't in here? Let me know what it is.