Leasing Industrial Space: A Business Owner's Guide

Leasing industrial space requires understanding unique terms and considerations. This guide covers what businesses need to know.

Triple Net (NNN)

• Most common for industrial
• Tenant pays base rent + property taxes + insurance + maintenance
• Lowest risk for landlord
• Use our Triple Net Lease Calculator

Gross Lease

• Landlord pays all expenses
• Higher base rent
• Less common for industrial

Modified Gross

• Some expenses shared
• Negotiable split

Base Rent

• Quoted as $/sqft/year
• Range: $8-$20+/sqft depending on market and quality
• Example: $12/sqft for 10,000 sqft = $120,000/year

Additional Rent (NNN)

• Property taxes: $1-$3/sqft
• Insurance: $0.25-$0.75/sqft
• CAM: $1-$3/sqft
• Total NNN: $2.25-$6.75/sqft

Total Occupancy Cost

Total = Base Rent + NNN + Utilities + Insurance (contents)

Clear Height

• 16-24 ft: Standard (older buildings)
• 24-32 ft: Modern (better for high-bay storage)
• 32+ ft: High cube (premium logistics)

Loading Docks

• Dock-high: Standard trailer height (48 inches)
• Grade-level: Ground-level access
• Drive-in: Door directly into building
• Number of docks affects functionality

Power Supply

• 3-phase power: Required for manufacturing
• Amps: Capacity for your equipment
• Cost to upgrade: Can be significant
• Verify power capacity before leasing

Floor Load Capacity

• Measured in psf (pounds per square foot)
• Warehouse: 150-250+ psf typical
• Manufacturing: 200-500+ psf depending on equipment
• Verify capacity for your use

Truck Access

• Turning radius: For 53-foot trailers
• Trailer parking: On-site storage
• Truck court depth: Space for maneuvering
• Road weight limits: Access road capacity

Environmental Requirements

• Ventilation: For fumes, dust, heat
• Waste disposal: Hazardous materials handling
• Spill containment: For chemicals/oils
• Emissions: Air permits if required

What to Negotiate

1. Base rent: Compare to market
2. Free rent: 1-3 months for fit-up
3. TIA: $10-$30/sqft for improvements
4. NNN cap: Limit annual increases (3-5%)
5. Lease term: 3-5 years (5-10 for larger spaces)
6. Renewal options: Pre-negotiated terms
7. Expansion rights: Right to lease adjacent space
8. Termination rights: Early exit option
9. Holding over: Terms if you stay past lease end

Industrial-Specific Negotiations

1. Power upgrade: Who pays for power improvements
2. Environmental compliance: Who handles existing issues
3. Yard use: Outdoor storage and truck parking
4. Signage: Building and monument signage
5. Repairs: HVAC, roof, dock door maintenance
6. Capital improvements: Who pays for major replacements

Key Clauses to Review

• Use clause: What activities are permitted
• Alterations: What changes you can make
• Maintenance responsibilities: Who fixes what
• Insurance requirements: Coverage types and amounts
• Indemnification: Liability allocation
• Assignment/subletting: Transfer rights
• Default remedies: What happens if you breach
• Restoration: End-of-lease obligations

Professional Help

• Commercial real estate lawyer: Review lease ($2,000-$5,000)
• Broker: Negotiate terms (free for tenant)
• Environmental consultant: Assess site if needed
• Contractor: Estimate fit-up costs

Ontario

• Strong industrial leasing market
• High demand in GTA
• Environmental Compliance Approvals may be needed

British Columbia

• Limited supply in Metro Vancouver
• Premium rates
• Contaminated Sites Regulation applies

Alberta

• More affordable industrial space
• Generally better terms for tenants
• Energy sector sensitivity affects market

Industrial leasing requires understanding unique terms like clear height, loading docks, and power capacity. Negotiate NNN caps, TIA, and renewal terms. Work with a commercial broker and lawyer. Use our Calculators: Triple Net Lease, Lease vs Buy, Commercial Mortgage. The AI Advisor can answer industrial leasing questions.

This guide is for educational purposes only.