Commercial real estate leases can be lengthy and complex and not understanding them can cost you money. When choosing your commercial real estate and negotiating your lease, the right broker will ensure that you are aware of all additional charges that can quickly run up your monthly costs, such as electricity.
Electricity usage clauses are notoriously long and complicated, often allowing the landlord to incrementally increase your electricity charges over time. This can cost you thousands of additional dollars for electricity that you are not actually consuming. Smaller New York City tenants particularly need to be careful of this.
Attorneys are often unfamiliar with how electricity is measured so having an experienced commercial real estate broker on your side who has hands on experience with all aspects of the properties they are representing can save you thousands of dollars. Metro Manhattan Office Space brokers will help ensure that you are being billed appropriately and in the most cost-efficient manner under your New York commercial real estate lease.
Commercial landlords bill their tenants for electricity in the following ways:
1. Rent Inclusion: The landlord bills electricity directly to the tenant on a monthly basis and at a fixed amount per square foot. Typically, electricity costs for commercial office space range from $3.00 to $4.00 per square foot. Smaller tenants often have rent inclusions as it is too expensive to install a meter in a smaller space. Given that the majority of tenants in the commercial real estate market in New York City are small tenants, rent inclusion is a prevalent method of billing. Without the appropriate protection, landlords often get away with billing more than the amount of electricity the tenant is actually consuming.
2. Direct Electricity: Typically the most cost effective electricity clause in a commercial lease, permitting the tenant to buy electricity directly from the utility company. An electricity meter must be present in the space for direct electricity to be an option. Full floors or large commercial spaces tend to have their own electricity meters.
3. Sub-Meter: In this case the demised space has its own meter, which the landlord reads each month. The landlord bills the tenant for the cost of electricity consumed plus an administrative fee ranging from 5% to 20% of the base electricity cost. In some cases the landlord of a large building may be able to negotiate better rates with the utility company than you could on your own making it cost effective for the tenant despite the administration fee.
Electricity usage is only one component of the additional rent you will be charged under your commercial real estate lease. Other components can include heating, air conditioning, water, trash removal, landscaping, snow removal, janitorial expenses, insurance, security, management fees, repairs and maintenance, etc. It takes an experienced broker to not only help you understand these costs and the impact they will have on your rent but to also steer you clear of landlords with excessively high fees.
Metro Manhattan Office Space has been working with reputable landlords and helping tenants understand and negotiate lease terms since 2004. Finding your ideal location is only the first step, we then help ensure that all of your interests are being protected. We know that avoiding excessive costs can mean the difference between success and failure in your business.
Contact Alan Rosinsky, Principal Broker of Metro Manhattan Office Space, Inc., for a FREE consultation today: (212) 447-5403.