This a the first of a series of 3 blogs explaining the different types of commercial rent structures.
When leasing commercial space, understanding the type of lease agreement is crucial. One common lease type is the gross lease, which is also sometimes referred to as a full-service lease. But what exactly does a gross lease entail, and is it the right choice for your business? Let’s dive into the basics and look at a practical example.
What is a Gross Lease?
A gross lease is a lease structure in which the tenant pays a fixed rent amount, while the landlord covers most, if not all, of the property’s expenses. These expenses can include property taxes, insurance, maintenance, and often even utilities. For tenants, this type of lease provides predictable monthly costs, which can make budgeting simpler and easier.
Because the landlord assumes responsibility for property expenses, gross leases are often found in office buildings and shared commercial spaces where landlords manage the majority of building operations.
Imagine renting office space in a large office complex with a gross lease. As the tenant, you pay a set amount each month. This amount is inclusive of the costs associated with property taxes, building insurance, and maintenance. The landlord handles all maintenance and operational expenses, such as cleaning common areas, maintaining landscaping, and ensuring the building is secure.
Example of a Gross Lease
With this setup, you’re able to focus on running your business without worrying about additional costs. Gross leases can be ideal for businesses looking for predictability and simplicity in their lease agreements.
Is a Gross Lease Right for You?
If you value consistent expenses and prefer not to manage variable costs like maintenance and insurance, a gross lease may be an excellent fit for your business. However, it’s essential to clarify which specific expenses are covered under your gross lease, as lease structures can vary.
Sharon Kantor Bogetz, MBA is a commercial real estate broker licensed in Illinois and Indiana. She works with owners, tenants and investors.