If you’re looking to rent or lease industrial space–particularly in North Texas–you’re in the right place. There is much information to digest, many options from which to choose, and plenty of factors to consider. Let’s break down industrial space rental and leasing, piece by piece.
Let’s start with the basics…an industrial real estate lease is a rental agreement between an owner of commercial space (the landlord) and a business (the tenant). Pretty simple, right? One significant difference between an industrial lease and a residential lease is that industrial real estate leases can be complex and there are many negotiation points. That’s partially because these leases frequently include costs on top of the base rent number–think fees, utilities, repair and maintenance, common area maintenance, and others.
These extra vary from property to property, so it’s a good idea for a business to work with a trusted broker–say, Preston Bend–who is an expert in procuring and negotiating the best deal for your business.
There are generally three types of real estate leases, and each dictates the specific responsibilities of both landlord and tenant.
- Full-service lease. With this type of lease, rent is included, which means that the business pays monthly rent–and from that monthly rent, the landlord pays most or all of the property’s expenses, such as insurance, taxes, maintenance, and utilities. A full-service lease is essentially a “monthly-payment-covers-everything” arrangement. Think of it like an all-inclusive vacation package, where you pay for everything upfront and pay nothing during your stay. This most often is found in Office Leases, however, it can be found in unique Industrial leases.
- Net lease. In a net lease arrangement, the tenant often pays a lower base rent than a full-service lease but is responsible for some (if not all) of the property expenses, including maintenance, trash collection, sewer and water utilities, landscaping, and others. Many Landlords have started using Net Leases as it protects their return on investment as operating expenses(Tax, Insurance, Maintenance, etc.) generally increases with time. .
- Modified gross lease. Similar to a full-service lease, a modified gross lease involves the tenant paying rent in one sum, with some (not all) negotiated expenses included in that payment, but does not generally include utilities.
Industrial real estate leases can be complex and often confusing, which is why it’s essential to find a trusted commercial real estate firm to guide you along the way. At the end of the day, you want to lease a space that works for your specific business–there’s no one-size-fits-all property. Here are some considerations to keep in mind when looking for the right industrial space:
- Your budget. Just like you must be able to afford your mortgage or rent payments for your home, you must be able to afford your industrial real estate lease. Have a maximum monthly budget in mind, and don’t forget to include extra costs such as utilities, taxes, and other expenses when you’re calculating.
- Space size. How much do you really need to effectively operate your business? The last things you want to do are overpay for space you’ll never use or underpay and grow out of your space immediately. Consider the number of people you expect in the space at one time (employees, customers, etc.) and work the square footage numbers from there.
- Your customer. This is a critically important factor, because knowing who your ideal customer is will dictate where you should lease space. Say you’re looking at office space–you would ideally want space in a location that is reasonably close and convenient to your employees. If you’re running an e-commerce warehouse, you want a location that helps expedite shipments and deliveries.
- Property type and zoning. A lot to consider here. If you’re looking for a newer, larger building located near transportation hubs, a multi-market distribution facility (generally along the outer edges or suburbs of major urban areas) is ideal. For quick shipping to large cities and markets, city distribution properties in urban areas can accommodate that; the downside is those buildings tend to be on the smaller and older side. If you need access to major seaports, a gateway facility could be right for you.
As you can see, leasing industrial real estate can be a complicated proposition. That’s where Preston Bend Real Estate can help. With experience on both sides (landlord and tenant) of the negotiating table, we’re well equipped to help you negotiate the right lease transaction for your business. When you partner with us, you don’t need to worry about the complexities of lease transactions; instead, you can dedicate that time and focus to the success of your business.