Commercial Real Estate Arizona

If you own or operate a business, you probably rent or own commercial real estate. Most businesses require space of some sort, either for a storefront, office, personal, or warehouse storage. As your company grows, you may need more space or a different kind of space. Expansion, storage, or just a better location may all cause you to look for a new piece of commercial real estate.

What you may not know is that you are able to negotiate and bargain for more favorable lease terms. Just because a landlord calls an agreement a “standard lease” doesn’t mean it’s set in stone. There are no laws requiring that you follow the same agreement that all tenants who came before you did. Commercial real estate leases may allow for changes to the property, longer lease terms or other variations.

Before you begin negotiating, you should know the answers to a few key questions. Are others vying for the commercial real estate you have your eye on? If they are, your position is weakened, since the other company might not be as informed as you are and sign the lease blindly.

Has the space been vacant for very long? If it has, the landlord may be more desperate to rent it out, leaving you more leverage. Also, consider how desirable the space may be in terms of location, layout and other commercial real estate needs.

There are dozens of terms in any lease agreement. In addition to the monthly rent amount, there are limitations on the use of premises, how much space is leased, access to adjoining storage space, and more. Depending on the location and specific setting of the commercial real estate in Arizona, you may be able to negotiate some or all of these terms.

Common commercial real estate lease terms that are negotiated include:

The monthly rent amount

Free rent granted by the landlord or leasing company after a set time of on-time payments or in response to a longer lease signed

Length of the lease in terms of months or years

Use of the premises, including parking spaces, access hours, and interior changes

Square footage and exact site space leased (can you rent half the office?)

Costs associated with the operating of the commercial real estate. Will the landlord cover water and sewer?

Process and permissibility of tenant improvements to be reimbursed by landlord

Repairs and maintenance responsibility, both financial and scheduling

Subletting approval process or permissibility

Renewal terms including reduced rent, raised rent, and free rent upon renewal

Rights and costs involved with leaving or canceling a lease. Under what terms can a renter leave without penalty?

Insurance requirements in Arizona

Security deposit, damage deposit, and last month’s rent terms

Additional space options available to the tenant if needed

In addition to the terms that may vary, the actual lease type can vary as well. There are five main types of leases. The type you need depends on your business structure, budget, and space available.

A gross lease is the most common type of Commercial Real Estate agreement. The tenant submits monthly rental payments to a landlord who, in turn, takes responsibility for paying taxes, insurance, maintenance costs, and other expenses associated with owning property in Arizona. These are often called “standard leases,” but understand that there is nothing “standard” about them. There is no regulatory authority that states any terms are set in stone.

A net lease is the second most common commercial real estate lease type. In a net lease, the tenant pays a monthly rent to a landlord and part or all the expenses associated with real estate ownership including maintenance, repairs, insurance, and taxes. Net leases often allow the tenant more flexibility in their use of the commercial real estate. If you need to modify the commercial real estate you are leasing, this type of lease may be the best option for you.

A triple net lease is very similar to a net lease in that the tenant pays for most or all the operating costs associated with the commercial real estate. These are most often free-standing buildings in Arizona.

A shopping center or strip mall lease in Arizona is aptly named. The tenant will pay a rate per square foot of the facility and some of the operating costs shared by the common areas of the shopping center. These usually include a portion of the property taxes, structure insurance, maintenance, repairs including parking areas, and delivery bays. While you may pay more for a shopping center space, it can be an ideal option to gain more customers, especially if the shopping center is heavily trafficked.

The final and most involved type of lease is a land lease or ground lease. This involves a tenant leasing a parcel of land in Arizona with the intent to build property of some sort on the lot. While the buildings are purchased and maintained completely by the tenant, upon expiration of the lease, all buildings, improvements, and the property reverts to the owner of the land. These are typically very long-term leases, ranging anywhere from 5 years to 100 years or more.