Navigating a commercial real estate CRE lease can feel overwhelming. Between understanding different lease types, calculating true occupancy costs, and negotiating terms that protect your business, there’s a lot to consider before signing on the dotted line.
Whether you’re leasing your first office space or relocating an established company, the questions you ask—and the answers you get—can mean the difference between a lease that supports your growth and one that drains your resources.
In this comprehensive guide, we’ll answer the 10 most common questions business owners ask about commercial real estate and office leasing. And we’ll show you how Interior Avenue’s Easy Spaces program can simplify the entire process by turning furniture from a major capital expense into a flexible operational cost that aligns with your lease terms.
1. What Type of Lease Is Best for My Business?
Commercial leases vary dramatically in how expenses are divided between landlord and tenant. Understanding the differences is critical to evaluating your true occupancy costs.
Gross Lease (Full-Service Lease)
In a gross lease, the tenant pays a single, fixed rental fee that includes most property-related expenses. The landlord is responsible for property taxes, building insurance, maintenance, utilities, and common area costs.
Best for: Businesses that want predictable monthly costs and minimal administrative burden. Ideal for smaller companies or those without dedicated facilities management.
Example: You pay $30/sq. ft. annually, and that’s essentially your only cost. No surprise bills for property tax increases or unexpected roof repairs.
Net Lease
In a net lease, the tenant pays a lower base rent but assumes responsibility for many or all of the building’s operating expenses. These come in three varieties:
- Single Net Lease (N): Tenant pays base rent plus property taxes
- Double Net Lease (NN): Tenant pays base rent plus property taxes and insurance
- Triple Net Lease (NNN): Tenant pays base rent plus property taxes, insurance, and maintenance
Best for: Larger companies with facilities management capabilities who want more control over operating expenses and can handle variable monthly costs.
Example: You pay $22/sq. ft. base rent, but you’re also responsible for your share of property taxes ($2/sq. ft.), insurance ($1/sq. ft.), and CAM charges ($3/sq. ft.)—bringing your total to $28/sq. ft., plus potential fluctuations.
Modified Gross Lease
This hybrid approach splits expenses between landlord and tenant. The exact division is negotiable and varies by lease.
Best for: Businesses seeking a balance between cost predictability and lower base rates. Common in multi-tenant office buildings.
Example: You pay base rent, and the landlord covers structural maintenance and property taxes, but you pay your proportionate share of utilities and janitorial services.
The Bottom Line
There’s no universally “best” lease type. Evaluate based on:
- Your preference for predictability vs. control
- Your ability to manage variable expenses
- Your company’s size and administrative capacity
- Current market conditions and availability
2. How Is My Total Rent Calculated?
Office rent is typically quoted as a price per square foot per year (e.g., “$30 per square foot”), but that number rarely represents your actual total cost. Understanding the full calculation prevents budget surprises.
Base Rent Calculation
Start with the basic formula:
Annual Rent = Rentable Square Feet × Rate per Square Foot
Monthly Rent = Annual Rent ÷ 12
Example:
- Rentable square feet: 2,500 SF
- Quoted rate: $28/SF
- Annual rent: 2,500 × $28 = $70,000
- Monthly rent: $70,000 ÷ 12 = $5,833
But wait—there’s more to consider.
Additional Costs in Net Leases
If you’re signing a net lease, add operating expenses:
- Property taxes: Your proportionate share of the building’s property tax bill
- Insurance: Your share of the building’s property insurance
- CAM charges: Common Area Maintenance fees (more on this in Question 8)
- Utilities: Depending on lease structure, you may pay separately or as part of CAM
- Janitorial services: Sometimes included in CAM, sometimes separate
These additional costs can add $3-$8 per square foot annually, significantly increasing your total occupancy cost.
Rent Escalations
Most multi-year leases include annual rent increases, typically:
- Fixed percentage: 2-3% per year
- CPI-based: Tied to Consumer Price Index changes
- Fixed dollar amount: $0.50/SF increase annually
Factor these escalations into your long-term budget. A $28/SF lease with 3% annual increases becomes $29.68/SF in year three and $31.46/SF in year five.
The True Cost Formula
Total Annual Occupancy Cost = (Base Rent + Operating Expenses + Utilities) × Rentable SF
Always ask for a comprehensive breakdown showing all cost components before comparing properties. A $32/SF gross lease might actually be cheaper than a $26/SF triple net lease once you add operating expenses.
3. How Much Office Space Do I Need?
One of the most common mistakes businesses make is leasing too much or too little space. Both scenarios cost money—either in wasted rent or in premature relocation costs.
The Square Footage Rule of Thumb
A common guideline is to allocate 125 to 250 square feet per employee, but this range is wide because space needs vary dramatically based on your specific situation.
Factors That Determine Your Space Needs
Office Layout Philosophy
- Traditional private offices: 150-250 SF per person (includes private office plus shared common areas)
- Cubicle/panel systems: 100-150 SF per person
- Open-plan benching: 75-125 SF per person
- Hybrid/hoteling: 50-100 SF per person (since not everyone is in daily)
Growth Projections
Don’t just plan for today’s headcount. Consider:
- Hiring plans over the next 2-3 years
- Seasonal fluctuations in staffing
- Whether you’ll need space for contractors or temporary workers
- Buffer room for unexpected rapid growth
Hybrid and Remote Work Policies
If you’ve adopted hybrid work:
- How many employees are in-office on peak days?
- Do you need assigned desks or can you implement hot-desking?
- Can you reduce square footage by 20-40% compared to pre-pandemic norms?
Common Areas and Support Spaces
Beyond individual workstations, account for:
- Conference rooms (typically 150-300 SF each)
- Break rooms and kitchenettes (100-200 SF)
- Reception and waiting areas (150-300 SF)
- Copy/print stations and storage (100-200 SF)
- Private phone booths or focus rooms (40-60 SF each)
A Practical Calculation
Let’s say you have 20 employees in an open-plan environment with hybrid work:
- 20 employees × 60% average in-office rate = 12 daily occupants
- 12 workstations × 100 SF = 1,200 SF
- Conference rooms: 300 SF
- Break room: 150 SF
- Reception: 200 SF
- Support spaces: 150 SF
- Total usable space needed: 2,000 SF
- With 15% load factor: 2,300 rentable SF
This is a starting point. Work with a space planner or broker to refine based on your actual workflow and culture.
4. What Lease Length Should I Agree To?
Lease term is one of the most strategic decisions you’ll make, balancing flexibility against cost savings and stability.
Short-Term Leases (1-2 Years)
Advantages:
- Maximum flexibility for uncertain growth trajectories
- Easier exit if business conditions change
- Lower commitment if testing a new market
Disadvantages:
- Higher rent (landlords charge premium for short-term risk)
- Less negotiating leverage for tenant improvements
- Instability—you may need to relocate frequently
- Minimal or no rent abatement periods
Best for: Startups in early stages, companies testing new markets, businesses with uncertain futures.
Standard-Term Leases (3-5 Years)
Advantages:
- Balance of stability and flexibility
- Reasonable negotiating leverage for improvements and concessions
- Predictable costs for medium-term planning
- Opportunity for one or two renewal options
Disadvantages:
- Less flexibility than short-term if rapid growth or contraction occurs
- May not lock in rates long enough to avoid market increases
Best for: Most small to mid-sized businesses with reasonable growth visibility. This is the most common lease term.
Long-Term Leases (5-10+ Years)
Advantages:
- Locks in rates for extended periods, protecting against market increases
- Maximum landlord incentive for tenant improvement allowances
- Stronger negotiating position on all terms
- Stability for long-term business planning
Disadvantages:
- Significant commitment with limited flexibility
- Risk of outgrowing or underutilizing space
- Difficult and expensive to exit early
- May lock you into outdated space if your needs evolve
Best for: Established businesses with stable operations, predictable growth, and confidence in long-term market presence.
Strategic Considerations
When deciding on lease length, consider:
- Renewal options: Negotiate options to extend at predetermined rates or fair market value
- Early termination clauses: Include provisions allowing exit under specific circumstances (e.g., company sale, major downsizing)
- Expansion rights: If you’re growing, secure rights to adjacent space or priority on other vacancies in the building
- Sublease rights: Ensure you can sublease if circumstances change
5. Can I Negotiate the Lease Terms?
Absolutely yes—and you should. Commercial leases are highly negotiable, and landlords expect tenants to negotiate. Accepting the first proposal without pushback often means leaving money on the table.
Key Negotiable Terms
Base Rent and Rent Escalations
The quoted rate is rarely final. Negotiate:
- Lower initial base rent, especially in soft markets
- Smaller annual escalations (cap at 2% instead of 3%)
- Delayed escalations (rent stays flat for first 2 years, then increases)
Tenant Improvement Allowances (TI)
Landlords typically provide funds to build out your space. Industry standard is $20-$60 per square foot, but this varies by:
- Market conditions
- Lease length (longer leases = higher TI)
- Building class and landlord financial position
- Your creditworthiness and negotiating leverage
Push for higher allowances if you’re signing longer leases or if the space requires significant work.
Rent Abatement (Free Rent)
Free rent during the initial months allows you to move in, set up, and begin operations without immediate rent obligations. Typical ranges:
- 1-2 months for short-term leases
- 3-6 months for 5-year leases
- 6-12 months for 10+ year leases
Use rent abatement to offset moving costs, furniture expenses, and the transition period before full productivity.
Operating Expense Caps
In net leases, negotiate caps on annual increases in operating expenses (CAM, taxes, insurance). A cap of 3-5% annually protects you from dramatic spikes in costs you can’t control.
Early Termination Rights
Include provisions allowing you to exit the lease early under specific conditions:
- Company sale or merger
- Significant downsizing (e.g., 30%+ reduction in headcount)
- Force majeure events
- Payment of early termination fee (typically 3-6 months’ rent)
Expansion and Contraction Rights
- Right of first refusal: Priority to lease adjacent space that becomes available
- Expansion option: Pre-negotiated right to add specific square footage at predetermined rates
- Contraction option: Ability to reduce leased square footage at specific points (less common, harder to negotiate)
The Value of Professional Representation
Hiring an experienced tenant representative broker costs you nothing (landlords pay broker commissions) but can save tens of thousands of dollars through better negotiated terms. Brokers know:
- Current market rates and concessions
- Which terms landlords will negotiate on
- How to structure offers that get accepted
- Creative solutions to deal-breaker issues
Don’t negotiate a commercial lease without professional help unless you have significant CRE experience yourself.
6. What About Maintenance and Repairs?
One of the most contentious aspects of commercial leases is determining who pays for what when something breaks, wears out, or needs upgrading.
Typical Responsibility Divisions
Landlord Responsibilities (Usually):
- Structural elements (roof, foundation, exterior walls)
- Building systems (HVAC, electrical, plumbing) serving multiple tenants
- Common areas (lobbies, hallways, parking lots, elevators)
- Code compliance for building-wide issues
- Exterior maintenance and landscaping
Tenant Responsibilities (Usually):
- Interior maintenance within the leased premises
- Non-structural repairs (drywall, paint, flooring)
- Tenant-specific HVAC, electrical, or plumbing within the suite
- Janitorial services for your space
- Damage caused by tenant, employees, or guests
The Gray Areas
These are negotiable and should be clearly defined in your lease:
HVAC Maintenance: Who pays for filter changes? Annual servicing? Major repairs or replacement?
Lighting: Who pays for bulb replacement? Fixture repairs? Energy-efficient upgrades?
Doors and Windows: Who handles repairs when they break? Replacement if they’re simply old?
Wear and Tear: Normal wear shouldn’t be tenant responsibility, but leases often make tenants liable for everything. Negotiate exclusions for normal wear.
Improvements Made by Tenant: If you install something (e.g., specialty lighting, upgraded flooring), who maintains it?
Critical Negotiation Points
Exclude Responsibility for Pre-Existing Conditions
Don’t inherit liability for problems that existed before you moved in. Include language like: “Tenant is not responsible for maintenance or repair of any systems, fixtures, or conditions existing prior to lease commencement, except to the extent damage is caused by Tenant.”
Define “Structural” Clearly
Landlords sometimes try to shift costs by narrowly defining “structural.” Ensure the definition includes all major building systems and components.
Cap Maintenance Costs
In net leases, negotiate caps on your share of building-wide maintenance costs to prevent unexpected spikes.
Require Landlord Approval for Major Work
If you’re responsible for maintaining certain systems, require landlord pre-approval for any work over a certain dollar threshold (e.g., $5,000). This protects you from landlord claims that you failed to maintain properly.
7. What If My Business Needs Change?
Business conditions change constantly—growth spurts, contractions, market shifts, strategic pivots. Your lease should accommodate reasonable flexibility rather than locking you into rigid, unchangeable terms.
Subleasing and Assignment Rights
Subleasing: Leasing all or part of your space to another party while you remain liable under the master lease.
Assignment: Transferring your entire lease obligation to another party (with landlord approval).
Most landlords allow both but require approval of proposed subtenants or assignees. Negotiate terms like:
- Landlord approval cannot be “unreasonably withheld”
- Specific approval timeline (e.g., 30 days)
- Ability to recapture some sublease profit above your rent
- No additional fees beyond actual landlord costs for processing
Even if you don’t think you’ll need to sublease, negotiate these rights. You can’t predict future circumstances.
Expansion Rights
If growth is likely, negotiate:
Right of First Offer: Landlord must offer you adjacent or nearby space before marketing it to others.
Right of First Refusal: If landlord receives an offer from another party for adjacent space, you can match it.
Pre-Negotiated Expansion Option: Specific adjacent space is reserved for you at predetermined rates and timelines.
Expansion Option with Fair Market Value: You have the right to expand into specific space at then-current market rates (less favorable but better than nothing).
Contraction Rights
These are harder to negotiate but worth trying if your business is volatile:
Contraction at Specific Intervals: Right to reduce square footage by X% at year 3, for example, with advance notice.
Economic Termination Right: Ability to exit lease if revenue drops by certain percentage.
Space Return with Penalty: Option to return portion of space with payment equal to 3-6 months’ rent on returned space.
Relocation Rights
Some landlords reserve the right to relocate you to another space in the building. This should concern you because:
- Moving disrupts operations
- New space may be inferior (different floor, worse views, poor layout)
- You incur moving costs
If relocation rights exist, negotiate:
- Landlord pays all moving costs
- New space must be comparable or better (define “comparable”)
- No relocation in final 2 years of lease
- You have right to terminate if relocated space is unacceptable
Or better yet, negotiate to remove relocation rights entirely, especially if you’re a larger tenant or in a prime space.
8. What Are Common Area Maintenance (CAM) Fees?
CAM fees are one of the most misunderstood—and potentially abused—aspects of commercial leasing. Understanding how they work protects you from overpaying for shared space upkeep.
What CAM Typically Includes
Common Area Maintenance charges cover the landlord’s costs for maintaining and operating shared spaces in multi-tenant buildings:
- Cleaning and janitorial services for common areas
- Landscaping and grounds maintenance
- Parking lot maintenance and snow removal
- Common area utilities (lighting, HVAC)
- Elevator maintenance and repairs
- Security services and systems
- Property management fees
- Common area repairs and replacements
How CAM Is Calculated and Charged
Your Share = (Your Rentable SF ÷ Total Building Rentable SF) × Total CAM Costs
Example:
- Your space: 3,000 RSF
- Building total: 50,000 RSF
- Your share: 6%
- Annual building CAM: $200,000
- Your annual CAM: $12,000 ($4/SF)
- Monthly CAM: $1,000
CAM is usually charged monthly as an estimate, then reconciled annually. If actual costs exceeded estimates, you owe more. If estimates exceeded actuals, you get a credit (in theory—always verify reconciliations).
Common CAM Problems and How to Avoid Them
Problem: Poorly Defined CAM Scope
Landlords sometimes include inappropriate items:
- Capital improvements (should be depreciated, not fully expensed in one year)
- Landlord’s corporate overhead unrelated to the building
- Costs for vacant space (you shouldn’t subsidize vacancies)
- Leasing commissions and tenant improvement costs
Solution: Your lease should clearly define what can and cannot be included in CAM. Exclude capital improvements, leasing costs, and costs for unoccupied space.
Problem: No CAM Cap
Without caps, your CAM can increase dramatically year over year, destroying your budget.
Solution: Negotiate an annual cap on CAM increases (3-5% per year). This is called a “controllable expense cap.”
Problem: No Audit Rights
How do you know the landlord’s CAM calculations are accurate? Without audit rights, you have no recourse if they’re overcharging.
Solution: Include language allowing you to audit CAM expenses once annually with reasonable notice. Landlord pays for audit if errors exceed 5%.
Problem: Administrative Fees Buried in CAM
Some landlords charge 10-15% “administrative fees” on top of actual CAM costs.
Solution: Negotiate to eliminate administrative fees, or at minimum cap them at 5% and ensure they’re clearly disclosed.
Smart CAM Questions to Ask
Before signing, ask:
- What were the actual CAM charges per square foot for the past 3 years?
- Are there any pending major maintenance projects that will increase CAM?
- How is CAM reconciled and when do I receive annual statements?
- Do I have the right to review invoices and supporting documentation?
- What happens if the building is less than 95% occupied—do I pay more?
9. Should I Hire a Commercial Real Estate Broker?
Short answer: Yes. Hiring a tenant representation broker is one of the smartest investments you’ll make in the leasing process—and it costs you nothing.
How Broker Compensation Works
In commercial real estate, landlords pay broker commissions, not tenants. This means you get professional representation at no direct cost to you. The landlord pays a commission (typically 4-6% of total lease value) that’s split between the landlord’s broker and your broker.
This structure can create conflicts of interest if both sides of the transaction share the same broker, which is why you should always hire your own dedicated tenant rep.
What a Good Tenant Rep Broker Provides
Market Knowledge
- Current rental rates and concessions in your target areas
- Availability of spaces that fit your criteria (including off-market opportunities)
- Trends in local commercial real estate that affect your timing and negotiating power
- Comparative analysis of buildings and landlord reputations
Time Savings
Instead of researching properties, scheduling tours, and coordinating with multiple landlords yourself, your broker handles everything. This is especially valuable when you’re trying to run your business simultaneously.
Negotiating Expertise
Brokers negotiate leases daily. They know:
- Which terms are typically negotiable and which aren’t
- Creative solutions to deal-breaker issues
- How to structure offers that get accepted without overpaying
- When to push harder and when to compromise
Lease Review and Explanation
Commercial leases are complex legal documents. Your broker explains what everything means in plain English, highlights problematic clauses, and recommends changes before you sign.
Long-Term Relationship
A good broker becomes your go-to resource for future moves, expansions, or market questions. This relationship is valuable beyond just your current lease.
What to Look for in a Broker
- Specialization: Choose brokers who focus on tenant representation, not landlord representation
- Local market expertise: They should know your specific market intimately
- Experience with your size and industry: Someone who works with businesses similar to yours
- References: Ask for client references and check them
- Communication style: You should feel comfortable and informed throughout the process
When You Might Not Need a Broker
The only scenarios where going without a broker makes sense:
- You’re leasing a very small space (under 500 SF) where broker involvement may be disproportionate
- You have significant personal CRE experience and are confident negotiating yourself
- You’re renewing your existing lease and have already established a relationship with your landlord
Even in these cases, a quick consultation with a broker costs nothing and might reveal opportunities you hadn’t considered.
10. What Is the Process for Signing a Lease?
Understanding the step-by-step process for executing a commercial lease helps you stay organized, avoid mistakes, and ensure you’re making an informed decision.
Step 1: Space Planning and Needs Assessment
Before looking at properties, determine exactly what you need:
- Square footage requirements (see Question 3)
- Budget constraints (see Question 2)
- Preferred locations and submarkets
- Required amenities (parking, access to transit, nearby restaurants)
- Layout preferences (open plan vs. private offices)
- Technology and infrastructure requirements
This assessment prevents wasting time on unsuitable properties and ensures you evaluate options against consistent criteria.
Step 2: Location Scouting and Property Tours
With your broker’s help, identify candidate properties and tour them. During tours, evaluate:
- Does the space physically fit your needs?
- Is the building well-maintained?
- Are current tenants similar to your company (good sign)?
- Does the landlord seem responsive and professional?
- Are there any red flags (deferred maintenance, many vacancies, poor management)?
Tour at least 5-7 properties to develop a sense of market options and pricing.
Step 3: Presenting an Offer (Letter of Intent)
Once you’ve identified your top choice, submit a Letter of Intent (LOI). This non-binding document outlines your proposed terms:
- Desired square footage
- Proposed rental rate and lease term
- Requested tenant improvement allowance
- Desired rent abatement period
- Key contingencies (board approval, lease review, space inspection)
The LOI starts formal negotiations. Expect back-and-forth before reaching agreement on major terms.
Step 4: Lease Negotiation
Once the LOI is accepted, the landlord’s attorney drafts the full lease. This is where the details matter. With your broker’s and attorney’s help, negotiate:
- All financial terms (see Question 5)
- Maintenance responsibilities (see Question 6)
- Use clauses and operating restrictions
- Sublease and assignment rights (see Question 7)
- Insurance and indemnification requirements
- Default and remedy provisions
Multiple rounds of redlines and negotiations are normal. Don’t rush this phase.
Step 5: Due Diligence
Before signing, complete due diligence:
- Attorney review: Have a qualified commercial real estate attorney review the entire lease
- Financial review: Ensure your CFO or financial advisor confirms the economics work for your business
- Space inspection: Verify the space is in acceptable condition and improvements will be completed as agreed
- Landlord financial check: For smaller landlords, verify they’re financially stable and can fulfill obligations
If due diligence reveals problems, renegotiate or walk away. Better to lose your LOI deposit than sign a bad lease.
Step 6: Signing and Move-In Preparation
Once all parties agree to final terms:
- Execute the lease (all parties sign)
- Pay security deposit (typically 1-3 months’ rent)
- Finalize tenant improvement plans with contractor
- Order furniture and begin space planning (this is where Easy Spaces can help dramatically)
- Set up utilities and internet service
- Plan your move logistics
Timeline from LOI to lease execution typically ranges from 30-90 days depending on complexity, property size, and negotiation issues.
How Interior Avenue’s Easy Spaces Program Simplifies the Entire Leasing Process
Commercial leasing is complex enough without adding the burden of furniture procurement, which typically involves:
- $40K-$80K+ upfront capital investment
- 8-16 week lead times from order to installation
- Complex coordination with contractors and movers
- Long-term commitment to furniture you may outgrow
Interior Avenue’s Easy Spaces program removes these obstacles by converting furniture from a capital expense to a flexible operational expense.
Aligns with Your Lease Timeline
We structure furniture subscriptions to match your lease term—whether 3 years, 5 years, or longer. You’re not locked into furniture commitments that outlast your lease or force you to deal with disposal and resale when you relocate.
Preserves Capital for Business Growth
Instead of spending $60,000 on furniture upfront, you pay manageable monthly subscription fees. That preserved capital funds hiring, marketing, product development, or simply provides a cash buffer for uncertainty.
2-3 Week Turnaround
While traditional furniture procurement takes 2-4 months, we deliver and install in just 14-21 days. This means:
- Shorter rent-paying periods with empty, unproductive space
- Faster move-in and team productivity
- Reduced overlap if transitioning from another location
- Ability to capitalize on short-notice lease opportunities
Flexibility for Changing Needs
If your business grows, contracts, or pivots mid-lease (see Question 7), your furniture adapts:
- Add workstations as you hire
- Remove furniture if you downsize or go hybrid
- Reconfigure layouts to match new workflows
- Upgrade pieces to reflect evolving design preferences
You’re never stuck with fixed furniture that no longer matches your reality.
Zero Exit Hassles
When your lease ends, we handle furniture removal, cleaning, and disposal. No resale struggles, no storage costs, no moving logistics. You walk away clean and can focus on your next chapter.
Final Takeaway: Knowledge Is Negotiating Power
The more you understand about commercial real estate leasing, the better equipped you are to negotiate favorable terms, avoid costly mistakes, and create a workspace that truly supports your business goals.
These 10 questions represent the foundation of smart CRE decision-making. But remember: every lease is unique, every market is different, and every business has specific needs. Always work with experienced professionals—tenant rep brokers, commercial real estate attorneys, and trusted partners like Interior Avenue—to ensure you’re making informed decisions that align with your strategic objectives.
Ready to Lease Office Space in Phoenix Metro?
Interior Avenue’s Easy Spaces program serves Gilbert, Chandler, Mesa, Tempe, Queen Creek, San Tan Valley, and Apache Junction with flexible, subscription-based office furniture that makes your lease transition seamless and capital-efficient.
Whether you’re a business owner leasing your first office, a growing company expanding into new space, or an established organization relocating, we help you turn empty square footage into fully functional, professionally furnished workspaces—fast, affordably, and without draining your capital reserves.
Visit InteriorAvenue.online to schedule your free consultation today.
Let’s make your next office lease a success—from negotiation through move-in and beyond.