Are you prepared for commercial lease rates in Chicago’s Loop? If you haven’t actually taken the time to study rent within the area, then you could be wasting your time in pursuit of space that won’t actually work for you.

Today’s buyers have more access than ever before to information about the availability and cost of rents in a given area. However, many of these advertisements can be deceptive. If you’re taken in by low numbers that don’t include all of the costs, then you could find yourself looking at space which is $29 per square foot when your budget is $22… or even lower! For example, the prominent Willis Tower is currently advertising a rate of $19.50 per square foot and a extremely less prominent or globally known class A building in Downers Grove is advertising one that is $22 per square foot. Read on to understand how this could be!

Unless you’re professionally trained, it’s best to get a tenant representative who can help you work through these details – otherwise, you’re walking in blind. Fortunately, most tenant representatives will help you for free, because the landlord is the one paying them!

Here are three of the major ways rent can be calculated and shown to you, along with what they mean for your business.

Triple Net Leases

This type of lease requires you to pay for your percentage of net value of the real estate taxes on the assets you’re leasing, the net building insurance, and the net common area maintenance in addition to the stated rent. Some advertisements may only quote part of this cost to you, and by only quoting the base rent, without any of the additional amounts being mentioned, can provide an artificially low number that may be attractive, yet unrealistic. (This is why the Willis Tower example appears so low) However, this doesn’t mean that these rent advertisements are deceptive. Pay very close attention to the net costs, how they have trended over the last few years and don’t be afraid to ask for more information if you are unsure everything was disclosed.

Triple net leases tend to be more common in Class A and B office buildings. There are advantages to a triple net lease, including a high degree of transparency.

Single and Double Net leases also exist, and as the name implies, they cover fewer items than the full Triple Net agreement. If you’re offered either of these, be sure to ask about what isn’t covered and how much you can expect those items to cost you over time. In short, don’t hesitate to ask if you’re even slightly unsure about the terms of the lease agreement.

Full-Service Leases

This type of lease is all-inclusive and exists when the landlord pays for most or all of the major expenses the property faces. This includes taxes, maintenance, insurance, possibly utilities, janitorial, and so on. Many tenants prefer to seek out these types of leases because they’re tenant-friendly. The costs may be higher on paper than some other listed rents, but businesses won’t find themselves struck by unexpected fees or unsure of ongoing occupancy expenses.

Note that most full-service leases do have limits. Excessive use of utilities or janitorial services may involve additional payments on top of the standard amount, and contracts will typically specify when this happens and how much it will cost. In other words, it’s up to you to pay attention and avoid going over your limits.

Modified Gross Leases

These leases are a combination of each we have previously stated. The overall rent will be adjusted year over year by the increase or decrease in taxes, insurance and common area maintenance as compared to a base year, usually the first full year of your lease. In the current market all of these expenses have been trending upward.

Conclusion

Don’t be caught off-guard by the many types of leases available. The three listed above are among the most common types of lease agreements, but other methods do exist. It is up to the building ownership to dictate what type of lease agreement they will offer for a particular property. Although each seem different, they should be similar overall when compared with all costs included. Don’t get too hung up on the type, simply be sure you understand the differences before negotiating or signing. The worst thing you can do is enter a lease agreement without being fully informed about the costs you’ll pay each year. Proper understanding of each lease agreement, and how it will affect your business in the years to come, is crucial to successfully growing your business in that location.