Lease Base Rates

Next segment in our Leasing Series…Lease Base Rates.

When considering ‘Base Rates’ on a lease, this figure represents the dollars per ft. being paid for the premises. In industry terminology, this figure is normally considered to be ‘Net Rent’ to the landlord – which excludes all property taxes, operating, and common costs relating to the building. This is generally referred to as ‘Additional Rent’. The Net Rent is the basis of the return being generated on the property from an investment standpoint, and also serves to pay the financing against the property.

From a Tenant’s perspective, although base rates represent a major part of your monthly lease cost, you need to do the math in adding the additional rent portion (if this is confusing, look for our next post on Additional Rent). Typically, leased premises online are quoted at its base rate. As an initial comparison of properties, it is a good starting point.

In evaluating any market, you can typically seek out the base rate range of any district by looking at the active properties available. Getting to the actual base rates paid on recent deals, is a more involved process, but certainly is available if you look in the right places. These places include – MLS (ICX) data, local appraisers, and experienced local commercial leasing brokers.

As final note, what can you expect in terms of base rate fixing for a set lease term? Again things vary market to market and deal to deal – but generally, landlord’s will look for some sort of incremental increase(s) over the term of a lease. It will largely depend on the market you are in - ie. high vacancy vs. low vacancy and your approach in negotiating the deal.

Again seek out experienced commercial realtors with strong leasing backgrounds, to assist you in negotiating the appropriate lease terms for your purposes.