This post originally appeared on tBL member Lynn Drake's blog Compass-Commercial Blog | Expert Commercial Leasing Advice and is republished with permission. Find out how to syndicate your content with theBrokerList.
CRE Math Series: Financial Summary for an Industrail Space
If you saw our financial summary for an office location, you would notice this has a lot less information. In this situation we are assuming it is multi-tenant building and the landlord pays for all building costs and then calculates each tenants pro rata share of building expenses. These expenses include taxes, insurance, electrical for exterior lights, landscaping etc. When a tenant moves in under this scenario the landlord provides the expenses from the last few years and we can estimate what it will be for the upcoming years.
Two other very important expenses not shown here are utilities and building repair. Unless my prospect has a history of their utility costs I don’t include them. One never knows if the client will heat the warehouse or not. If the client is moving from a building with 12-foot ceilings to 32-foot ceilings, there is no way to compute this cost difference. I’ve contacted utility companies for this information and they didn’t have formulas either.
The second and more important costs are charges for repairs. This is a net/net/net lease which means the tenant takes on a lot of responsibility for the repairs. Generally, when I’m negotiating an industrial lease I request the right to limit my client’s exposure. Usually this is done by defining who has responsibility for what and capping tenant’s costs in the event a capital improvement needs replacing.
Doesn’t it make sense to have this type of information available to you when you are making a financial decision? If so, contact us for your next renewal or relocation and we will provide your team with the important information to decide.