Effectively Lease Commercial Real Estate Properties Commercial Real Estate & Property for Rent in India

Leases are a common part of the commercial real estate industry. There are different types of leases, and it's important to understand the differences before signing any agreement. In this blog post, we'll go over the three most common types of leases in commercial real estate: fixed rate, adjustable rate, and net lease. We'll also discuss the pros and cons of each lease type. Read on to learn more!

Fixed Rate Lease

A fixed rate lease is one where the rental price or monthly payment remains the same over the course of the lease. This type of agreement is often seen in commercial real estate leases for retail properties, office buildings, medical facilities, and industrial buildings. Common lengths are 5-10 years with an option to renew at a predetermined rate. Most properties are leased on a triple net basis which includes property taxes in addition to rent; these can typically run between 8 - 10% depending on location and other factors.

Average Net Triple Net (NNN) Rent per SF Office Location: $10-$12

That said, there are additional costs associated with owning real estate that you should take into account when considering buying any property including:

- Maintenance and repairs of building components - Property management fees - Insurance premiums

It's important to factor these costs into your total monthly expenses. You can use our free ROI calculator to estimate the potential return on investment for a commercial property. In determining whether or not a building will be financially feasible as an investment, you should also take into account similar factors as those that would apply when buying a home including:

- Resale value - Cash flow from rental income (if applicable)

In summary, fixed rate leases are common in malls, shopping centers, offices and other retail properties. They tend to work best in areas where demand is high relative to supply and there is consistent tenant turnover to help maintain occupancy rates over time.

Adjustable Rate Lease

An adjustable rate lease works in the opposite way of a fixed rate lease. The tenant agrees to pay a certain monthly payment for an agreed upon time period (i.e. 5 years) but at the end of that term, the monthly cost will change based on prevailing market conditions. This type of agreement is common in retail properties looking to attract national tenants who can set-up their own leases directly with each landlord/management company without having to go through brokers or other 3rd party intermediaries.

Average Net Triple Net (NNN) Rent per SF Retail Location: $18-$25

One advantage for this type of agreement is that if you are able to lock in below market rates at one point, your expenses may be lower than what they would be with a fixed rate lease. On the other hand, if you are looking for long-term security in your rental payments, this might not be the right type of agreement for you.

Net Lease

A net lease means that the tenant pays all real estate taxes on the property as part of their monthly payment. These types of leases are common for retailers and restaurants looking to rent commercial space. In addition, most landlords prefer this kind of agreement because tenants have less control over costs on their end which is important especially when overall market demand slows down or there are major economic shifts otherwise impacting business revenue. This can work out favorably for tenants provided they expect their sales/revenue to remain steady or increase over the next few years.

Average Net Triple Net (NNN) Rent per SF Retail Location: $18-$25

The biggest drawback to this type of lease is that if your business revenues do not meet expectations, your landlord can terminate your agreement and charge you for any un-earned rent. This makes it important to compare the existing market tenant profile in order to determine future demand before entering into an agreement.

When considering which type of lease is best for your commercial real estate needs, be sure to review all of your options carefully including fixed rate leases, adjustable rate leases, and net leases. All three can work but there are different risks involved depending on what will make sense given the overall market conditions as well as other factors like resale value and cash flow.