Top 5 Questions From First-Time Retail Space Renters
As with any new territory, renting retail space for the first time may feel a bit overwhelming. We took note of five of the most frequently asked questions we receive from first-time retail space renters.
What does "NNN (triple net)" mean and why isn't it included in the "base rent"?
Triple net leases are the most common form of commercial lease. In it, the renter, or tenant, is responsible for paying the base rent, as well as any building operation costs, including real estate taxes, building insurance, and common area maintenance. The base rent and “triple net” fees are listed separately for two reasons: one, to allow tenants to see the breakdown of every cost, offering transparency and protection from price gouging, and two, as financial security for landlords in the case that a lease is broken.
What is a tenant improvement allowance and how does it work?
A tenant improvement (TI) allowance is the amount a landlord is willing to spend on renovations or updates to a leased space, and is typically expressed in a per-square-foot or total dollar sum. This should be included in the lease negotiations, and is based on the credit-worthiness of the tenant, term of the lease, and other factors. Depending on the negotiation, either the landlord or the tenant will contract the labor. Occasionally, due to industry connections, the landlord may be able to procure lower priced labor. You may also find that some landlords offer financial incentives such as rent discounts in exchange for their tenants retrofitting or upgrading a space. You should discuss all of this with your landlord, and be sure to get it in writing as a part of your lease.
What changes am I allowed to make to the space?
Want to paint the walls? Install new flooring? Talk to your landlord. The changes a renter is allowed to make depend on the specific space and the landlord, but generally speaking, long term renters typically have more leeway to make changes-- structural changes, for example-- that short-term renters do not. These specifics are important to discuss with your landlord as part of your lease negotiation.
Do I need my own insurance?
You’ll need both property insurance and renter’s insurance. A triple net lease already includes property insurance, which provides coverage in the case of weather-related damage caused by fire, wind, hail, lightning, etc., as well as vandalism of the property, among other things. Renter’s insurance, on the other hand, provides financial reimbursement for anything that could happen inside the retail space, such as theft, damage of possessions, or covering a tenant’s liability in the event that a shopper falls or is injured in the store.
What happens if I need to break my lease?
When it comes down to it, you’re responsible for the duration of the agreed upon lease term. However, occasionally you can collaborate with your landlord to help fill your vacancy to cover any lost rent if you need to break your lease. Another option would be to approach your landlord about the possibility of a lease buyout agreement. If during the lease negotiation phase you’re still not sure how long you’d like your lease term to be,you may choose to err on the side of a shorter lease, though this will generally include less freedom to make changes in your space.
Have more questions? That’s what we’re here for. Give us a call today at (864) 233-6391.