Commercial Real Estate Operating Expenses
Commercial Real Estate Operating Expenses – an Explainer
Operating costs, or op costs as they are generally known in the industry, are the costs associated with the day-day running and maintenance of an office building.
In a lease, operating costs can be part of a gross lease, where these expenses generally escalate at the same rate as the rental, or in a net lease scenario, these operating costs are isolated.
Operating costs can increase on an audited figure, or as a percentage within the lease agreement.
Below, are a few examples of the various operating costs you could expect to see within your lease:
1. Repairs and common area maintenance
2. Garden maintenance
3. Lift maintenance
4. Air-con maintenance
5. Building insurance
6. Security
7. Management fees
8. Cleaning of common areas
9. Generator levy (if multi-tenanted)
10. Lighting and water for common areas
The preceding operating costs are a few examples but are not limited to the above.
Before you sign a commercial office lease, make sure you understand the different types of leases that are available and ensure you have a thorough understanding if operating costs are included in your rental, as in a gross lease, or if you will be responsible for the payment of various operating costs, as in a net lease.
Carefully read through the lease agreement you have been given and ask pertinent questions if you do not fully understand the agreement before you sign.
5th Avenue Properties specialises in Commercial leases. Speak to one of our consultants today to get started!