Are you new to real estate business? If you are intending to invest in commercial real estate, you should get to know about the facts that are essential to make your business venture a success. Satisfactory location, rent and neighborhood are some of the things that always remain on the top, if you are looking for the success in commercial real estate business. You must have good negotiation skills so that you can negotiate the lease to terms that would allow you to start up your business with necessary opening. It also ensures long term profitability. Negotiation does not mean that you should dominate the landlord. It won’t do any good for you. Therefore, you must find a mutual decision on your lease that will be beneficial for you as well as landlord. If you don’t do lease on good terms, tenants will refrain from your property which means loosing on your business.
Since you are starting up with the business, you should know basic terminologies that are there in the real estate lease. If you are not sure about how to go about a lease while investing in commercial real estate in California, you should get in touch with reputed California Property Management Company. But still you should know about basic constituents of a commercial property lease. Any commercial property which is up for lease will have standard lease form agreement which will be prepared by the landlord. Structure will remain same but you will come across difference in terms and language from landlord to landlord and from property to property.
You will get this standard lease form agreement after your agent sends RFP (request for proposal) to the landlord. RFP will have several important issues however it must have section outlining the expectation of the tenants with respect to the Tax escalation and (CAM) common area maintenance. Base rent is the next thing that gets included in the lease. Base rent is the asking price for the space. It does not include any kind of taxes, insurance and maintenance that may be used for the build out. Common Area Maintenance (CAM) in addition to taxes and insurance known as Triple Net. It will be divided between the tenants on pro-rata basis. Now, let’s talk about the gross rent which means that total of base rent and triple that you would need to pay throughout the lease.
Vanilla box is the next terminology. It is not a dessert but every important aspect in a commercial lease. Primarily it is defined as concrete floor, drywall shell, basic commercial lighting and basic HVAC. The variation depends on the understanding of landlord about vanilla box. Build Out or tenant improvement is the amount of money which is to be taken out from vanilla box. Therefore, build out is a great bargaining tool especially while starting up a business when you don’t have big budget. Before finalizing the lease, you should know what is important.