Types of Commercial Lease Agreements: Office Space for Rent, Austin
Are you looking for a commercial property to lease in Austin? Whether you’re relocating from your current address or opening a shop for the first time, there are numerous rental options available.
The lease agreement is the mechanism by which a tenant can lease a commercial space directly from a landlord. Commercial leases are different from residential contracts and often vary from state to state city to city, and market to market.
If you are looking to lease office space in Austin, this overview of commercial lease agreements will give you more insight into the market.
Inclusive are tips on finding the best office space in Austin, some red flags to be aware of, and leasing costs. So let’s get right in.
Commercial Lease Types
Before you sign on the dotted line, you need to know what kind of agreement you’re getting into. This is because a lease determines what you’ll pay for and stipulates your liabilities as the tenant.
Legally, the three main types of commercial lease agreements are set forth below. In Austin, leases are customarily full service (rent is inclusive of all expenses) or a Triple Net Lease or “NNN.”:
Single Net Lease
Although it’s the least preferred by tenants, the single net lease is one of the lease agreements you may come across. Here, the agreement lists the tenant as the party responsible for paying the building’s base rent and property taxes.
The landlord covers other costs arising from operations in the property.
Double Net Lease
This type of lease agreement is similar to a single net lease. But, only some of the costs are more rationally distributed. In double net leases, also known as ‘NN’ agreements, the tenant pays two of the three property expenses.
Depending on the contract details, these can be taxes and utilities or taxes and insurance premiums. Either way, the landlord covers the remaining expense.
Triple Net Lease
A Triple Net lease is the most common lease structure in the Austin market. It also tends to be the most complicated lease because the tenant absorbs most of the landlord’s financial responsibilities. In this type of agreement, the lessee pays all property expenses, including taxes, insurance, and maintenance.
On the bright side, NNN leases have lower rental amounts as the tenant covers most of the cost.
Common red flags in Lease Agreements to be Aware of
Now that you know the types of leases and each category, what remains is signing the dotted line. Before you pull the trigger be aware of these common red flags:
Landlord Financial Woes
General knowledge about the landlord is beneficial. Consider doing background research of the owner’s financial situation. Our brokers are familiar with the Austin market and the reputation of various landlords, but here are a few things you may want to consider:
Look at the current state of the building, check to see if it’s uncared for or there are unoccupied office spaces. Plus, if the tenants have a poor track record of making payments, it could be that the landlord is struggling financially.
Unclear Charges and Rights
Our brokers review every lease agreement for commercial terms. Some landlords don’t clarify the tenants’ rights and net charges in a lease, which are severe omissions. This is because you’ll need them for a financial audit at the end of every year.
Furthermore, if the landlord fails on their obligations such as maintenance, there must be consequences for these actions.
Poor Delivery Conditions and Repair Terms
Depending on the lease agreement, tenants may inherit the problems that come with the premises.
If there are problems with major systems like HVAC, plumbing, and electrical, the lease should stipulate who will cover these costs.
Ambiguity
Ambiguous statements or varying numbers in the figures can cause confusion.
The best way to avoid misunderstandings down the road is to have a professional tenant representative and your attorney review and assist you with lease negotiation.
Tips on Locating the Best Office Space for Rent in Austin
Settling a lease agreement could be a complicated and lengthy process, and one our brokers are equipped to assist with. These tips will help you minimize errors and negotiate a feasible price offer for the space you intend on leasing. They include:
Consider Tenant Representation
Tenant representatives, such as Austin Office Space, are agencies that represent the tenant during lease agreement negotiations. Other agencies often represent both the tenant and the landlord, which can, at times, cause a conflict of interest for the tenant. Determine Your Requirements
What will you be using this space for? This is the first step to finding a property that suits your business needs.
If you have a growing workforce, you’ll need a property with growth possibilities.
Send Proposals to Potential Landlords
Before getting to the actual lease signing phase, sending out lease proposals is often beneficial to ensure that the space, and the potential landlord, are a good fit. After stating your terms, you will know if they’re willing to consent to them or not.
It is best to consult with a tenant representative to help you draft a complete commercial lease proposal that you don’t have to bargain for yourself. Tenant representatives understand the market, what concessions a particular landlord might be willing to make, and they can also help analyze any feedback proposals you get to determine the best offers.
Cost of Leasing a Commercial Space in Austin Texas
While other factors matter, none is greater than the price because it can break or seal the deal. But, the cost may vary from one market to another, and the Austin office market continues to grow.
Unlike some other commercial real estate markets, landlords in Austin calculate rent monthly as opposed to annually.
So, to get the exact amount you’ll have to pay, add the base rent to the operating expenses, or “triple net”and multiply the figure with property square feet. Then, finally, multiply the resulting figure by twelve if you want to get an annual fee.
Getting the Right Office Space for Rent in Austin
Finding an office space for rent in Austin is a big step, and leasing an even bigger one. Before you start hunting, consider these points and hire a professional to help you succeed. In Austin, tenant representatives are paid out of the landlord representative’s commission, so generally, their assistance to a tenant is at no cost to the tenant.
If you want a smooth leasing experience, please contact us for trusted tenant representation in Austin, Texas.
