Leasing a space (lender, insurance, sales, attorney)

[Rapture]

Are prices negotiable in shopping centers? What types of leases are usually offered and how do they work?

[Dave1215]

Leases will be by the square foot. In a shopping center your high traffic areas will be the highest and less traveled areas will be less. You also want to know about the "gross vs net" factor.

Gross is basically the full rate you pay - the square footage rate is your rate.

Net is where the landlord makes you responsible for a few items in addition to your paying the square footage rate. You will hear different terms but basically there will be Single, Double, and Triple Net.

Single Net: In addition to the square footage lease charge, you also pay your proration of propery taxes.

Double Net: In addition to the Single Net terms (square footage lease charge+Taxes), you also pay your proration of buildings insurance.

Triple Net: In addition to the Double Net terms (square footage lease charge+Taxes+Insurance), you also pay your proration of building maintenance.

Some lease terms are fixed (like house rent), some call for increases each periodic period, some call for base rent plus a percentage of gross sales.

Lease terms are negotiable, its just a contract, as with any business contract have your attorney review it. If you know a Commercial Lender or a Commercial Real Estate Broker both would be an excellent resource to learn.

Note: When you are quoted a square foot lease rate, remember that's an annual rate. To understand your monthly fixed expense, take your square foot rate times the square footage divided by 12. $9.75 sq foot lease for 800 square foot spot would be $650/month. $9.75 * 12 = 7,800yr / 12 = $650mo

[Rapture]

Thank you, that's exactly the info. I needed. I have looked into space in the past and I know it's by the sq. foot but I didn't understand the "net". The space I'm looking into is triple net.

[Dave1215]

If you are a start-up business try to negotiate the first month or quarter for free... they may do it if they know they have a long term tenant (which means they believe in what you are doing). Helps your initial cash flow as you gain your initial client base.