Tips for Assessing the Cost of the Rental
The true cost of a rental is not always the monthly rent.
Once you’ve found space that looks promising and worth pursuing, it’s time to figure out the true cost of the rental. You might ask, isn’t the monthly rent all you need to know? Unfortunately, it’s not that simple. For starters, with commercial space, the monthly rent can be a complicated figure, composed of various factors and calculated in downright Byzantine ways. And there are other expenses, which may not be called rent, but nevertheless feel like rent when you pay them on a regular basis. On the positive side, if you’re lucky, there may even be some savings -- like free rent for the first month or two -- that should be taken into account.
There are at least two important reasons to determine the true cost of leasing a given space. First, you need to make sure that the cost fits your budget. Second, if you’re comparing two or three different spaces, you need to know the true cost of each space if your comparisons are to mean anything. Once you understand how a prospective landlord measured the space and what kind of rent computation you’re being offered, you’ll be ready to roughly compare the rental costs for two or more places you’re considering.
The following tips cover important steps to take determine the true cost of the rental.
1. Determine how the landlord has measured the square feet. Commercial space is often advertised and rented on a cost-per-square-foot basis, rather than a descriptive basis (such as “the first floor”). For example, an ad might describe space as “2,000-Square-Foot Office Suite in New Building” or “2,000 Square Feet of Prime Retail Space.” However, 2,000 square feet doesn’t always mean that you’ll pay for and occupy exactly 2,000 square feet.
Strange as it may seem, many landlords -- especially in office buildings -- take their measurements from the middle or even the outside of exterior walls. It’s a bit like the butcher who charges you for the bone and fat as well as the edible portion of the steak. Obviously, if a landlord uses this method of measurement, you’ll wind up paying not only for usable space but also for some or all of the thickness of the walls.
2. Determine whether and how much you’ll be paying for common areas. In many buildings, there are parts of the structure or grounds that you’ll share with other tenants. For example, you and other tenants may share lobbies, hallways, elevator shafts, bathrooms, and parking lots. When you add these spaces up, they can amount to a hefty chunk of the property. Don’t assume that the landlord is going to let you use these shared facilities for free.
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