Most office tenants think in terms of “all-in rent,” but not all office leases are structured the same.
Understanding what is included in the quoted rent can make a significant difference when comparing office spaces and estimating total occupancy costs.
What Is a Full-Service (Gross) Lease?
A Full-Service (Gross) Lease typically includes base rent plus operating expenses such as property taxes, insurance, and common area maintenance (CAM).
The tenant generally pays a set rental rate, while the landlord is responsible for specified operating expenses according to the terms of the lease.
However, the exact expenses included can vary, so tenants should review the lease carefully to understand what is and isn’t covered.
What Is a Modified Gross Lease?
A Modified Gross Lease is a lease structure in which the landlord and tenant share responsibility for certain operating expenses.
Some expenses may be included in the base rent, while others are passed through to the tenant depending on the terms of the lease.
The specific structure can vary significantly from one property to another, which is why it is important to understand the details of the lease rather than comparing rental rates alone.
Why Does the Difference Matter?
Two office spaces can have the same quoted rental rate but very different total occupancy costs once operating expenses are factored in.
For example, one space may include certain property expenses in the quoted rent while another may pass some of those costs through to the tenant.
Before comparing spaces, it’s important to understand what is actually included in the lease, not just the rental rate shown on the surface.
How Does This Compare With a NNN Lease?
A NNN (Triple Net) Lease typically requires the tenant to pay certain property expenses in addition to base rent, which may include property taxes, insurance, and maintenance expenses.
Understanding the differences between lease structures can help tenants evaluate the total cost of different commercial spaces.
Ask a Broker
If you’re comparing office spaces or evaluating different lease structures, Jack Gordon can help you understand the terms and costs associated with your options.
Contact Jack to learn more about commercial real estate leasing and available opportunities.
