Pros and Cons of a Commercial Full-Service Gross Lease

Note from Fowler Property Advisors:
We get a lot of questions about the types of commercial real estate leases out there. What are the types of commercial leases? Which one is best? What should be included? As a result, we’ve decided to do a series of blog posts to help answer these questions, starting with an overview of the common lease structures, followed by overviews of Triple Net leases and Modified Gross leases. This is the final post in our series.

In Charlotte’s lively commercial real estate market, understanding the intricacies of leasing agreements is crucial for landlords and tenants alike. Among the various lease types available, full-service gross leases stand out as a popular option, offering a comprehensive approach to managing costs and responsibilities. Let’s take a look at what full-service gross leases entail and how they shape the commercial real estate scene in Charlotte.

What is a Full-Service Gross Lease?
A full-service gross lease, also known as a full-service lease, is a rental agreement in which the landlord assumes responsibility for most, if not all, operating expenses associated with the property. These expenses typically include property taxes, insurance, maintenance, utilities, and sometimes even janitorial services. In contrast to other lease structures like triple net leases (where tenants bear a significant portion of these costs separately), full-service gross leases provide a more inclusive and predictable cost structure for tenants.

Tenant Considerations
This is one of the primary advantages of a full-service gross lease for tenants – the simplicity it offers in budgeting and financial planning. With operating expenses bundled into the lease rate, tenants can better predict their monthly expenses without the uncertainty of fluctuating costs. This predictability is especially beneficial for small businesses and startups, allowing them to allocate resources more efficiently without worrying about unexpected bills for property maintenance or utilities.

Additionally, full-service gross leases often come with fewer administrative responsibilities for tenants. Since the landlord oversees property management and maintenance, tenants can focus their time and energy on running their businesses rather than dealing with facility issues or coordinating service providers.

Moreover, full-service gross leases can lead to better property maintenance and management. Since landlords are responsible for upkeep and repairs, they have a vested interest in maintaining the property’s condition to a high standard. This proactive approach to property management can enhance tenant satisfaction over time.

However, while full-service gross leases offer simplicity and predictability, they tend to also come with higher base rental rates compared to other lease structures. Additionally, tenants should pay attention to any clauses regarding operating expense pass-throughs, as certain costs may not be included in the base rent and could potentially increase over time.

By understanding the fundamentals of full-service gross lease agreements and considering their implications, all stakeholders can make informed decisions that align with their business objectives and financial goals. No matter which side of the transaction you’re on, when you’re ready to find the ideal spot for your business, it’s imperative to work with a commercial real estate advisor who will have your back and work for the best deal for you, whether leasing or buying. We have this experience and client-centered focus. Call us at 704.219.0908, email, or schedule an appointment using the button below.

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