At NorthWest, we understand the unique challenges facing physicians today, as funding and service models continue to evolve, and service providers are tasked with providing more efficient care to an aging population with diverse healthcare needs. Today and always, we strive to negotiate fair and reasonable leases with our new and renewing tenants.
Understanding Commercial Leases: Gross vs. Net
The key difference between residential and commercial leases is that in commercial leasing, a net lease is the norm. Unlike a gross lease, in which a tenant pays a flat monthly rate that is inclusive of all the costs to rent their space, a net lease is one in which the rental fee is broken down into two components: basic rent and additional rent.
Basic rent is the fee that covers the cost to rent your individual space. This fee is negotiated between the tenant and the landlord during the lease negotiation phase. The per square foot dollar amount you pay in basic rent can vary widely depending on a number of factors, however, it is generally dictated by the market rates in the area where you’ll be practicing.
Additional rent, commonly referred to as CAM (common area maintenance) or TMI (taxes, maintenance, insurance), is the portion of the rental fee that covers the landlord’s costs to run the building. Typically, each tenant in a building will pay additional rent that is comprised of their proportionate share of the ‘common’ costs at the building, which includes expenses like property taxes, utilities, janitorial services, and other building maintenance expenses.
Keeping Costs Low
Although the market you operate in will have the biggest impact on how much rent you pay to lease space for your business, there are some things you can do to keep your lease rates lower. The cost to build out your space is included in your basic rent, and is amortized over the term of your lease. In an ideal scenario, you’ll move into a space that meets your needs with minimal improvements required, which will have a notable impact on keeping costs low. If your business demands a highly customized suite that is more expensive to build out, signing a longer lease term will lower your monthly rental payments. Finally, an established landlord like NorthWest can pass on cost savings in additional rent as a result of operating cost efficiencies afforded to us by our size and scope.