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Consider the load factor when negotiating a commercial lease

On Behalf of | Nov 13, 2019 | Commercial Real Estate |

After finding the right retail space, a potential tenant will then enter into the negotiations with the landlord. The reason that it is important to negotiate the terms of a commercial lease is that rent is not based on just the square footage of the space. Orange County entrepreneurs may want to make sure they consider the load factor before signing anything.

Commercial tenants often have the use of certain common areas in addition to the retail space. The load factor is a way to calculate the total amount of rent they will actually pay. There is a difference between the usable space rented and the rentable space. The usable space is the square footage the tenant will actually occupy. Even if the tenant does not use all the space, it is still space only available to the tenant.

The rentable space includes those common areas shared with other retailers such as restrooms, common hallways, elevators and more. Landlords will expect retailers sharing this space to pay for a percentage of it, along with any necessary upkeep of those areas. How much a tenant pays for usable and rentable space is where the negotiations come into play.

Determining the load factor prior to negotiating a commercial lease will help a potential tenant understand the true amount of rent that will be due under the agreement. Failing to account for this and other factors could potentially jeopardize the success of a retail business. Working with an Orange County commercial real estate attorney could help ensure that all factors are considered prior to signing a lease, including the load factor.