Question 1

Q: What is a NNN (Triple Net) lease?

Accepted Answer

A triple net lease requires the tenant to pay base rent plus three additional expenses: property taxes, insurance, and common area maintenance (CAM). This structure is standard for retail and industrial properties. Landlords quote a base rent (e.g., $15/SF NNN), and you add approximately $3-8/SF for the "three nets" depending on the property.

Question 2

Q: What is CAM and how is it calculated?

Accepted Answer

CAM (Common Area Maintenance) covers shared expenses in a multi-tenant property: landscaping, parking lot maintenance, exterior lighting, property management fees, and sometimes roof and structural repairs. CAM is calculated by dividing total property expenses by leasable square footage, then charging each tenant their proportionate share. Always ask for CAM history and caps when negotiating.

Question 3

Q: What's the difference between gross and net leases?

Accepted Answer

In a gross lease, you pay one flat amount that includes rent and most operating expenses. In a net lease, you pay base rent plus some or all operating expenses separately. Gross leases are common for office space, while net leases dominate retail and industrial. Modified gross falls in between.

Question 4

Q: How does a 1031 exchange work?

Accepted Answer

A 1031 exchange lets you defer capital gains taxes by selling one investment property and purchasing another "like-kind" property. You have 45 days from closing to identify replacement properties and 180 days to complete the purchase. The exchange must be facilitated by a qualified intermediary you cannot touch the funds. Florida has no state income tax, making 1031 exchanges here particularly attractive.

Question 5

Q: What are tenant improvements (TI)?

Accepted Answer

Tenant improvements are modifications made to a commercial space for a specific tenant, walls, flooring, electrical, plumbing, and HVAC adjustments. Landlords often provide a TI allowance (e.g., $25/SF) as part of lease negotiations. Anything above the allowance comes out of pocket. Longer leases typically get higher allowances.

Question 6

Q: How much office space do I need per employee?

Accepted Answer

Plan for 150-250 usable square feet per employee for traditional layouts. Open floor plans can go as low as 100-150 SF per person. Don't forget conference rooms, break areas, and circulation, these add 20-30% to your requirements. With hybrid work, many companies now plan for 60-70% concurrent occupancy.

Question 7

Q: What is a cap rate?

Accepted Answer

Cap rate measures expected return on a commercial property investment. Calculate by dividing net operating income (NOI) by purchase price. A building producing $100,000 NOI selling for $1,250,000 has an 8% cap rate. Lower cap rates mean higher prices; higher cap rates mean lower prices. Cap rates in Brevard County range from 5-8% depending on property type.

Question 8

Q: Do I need a broker to lease commercial space?

Accepted Answer

You don't legally need one, but tenant representation is free to you, as the landlord pays the commission regardless. Without representation, you're negotiating against experienced landlords and their brokers. A tenant rep knows market rates, standard terms, and can negotiate free rent periods, TI allowances, and favorable renewal terms you might not know to ask for.

Question 9

Q: What is due diligence in commercial real estate?

Accepted Answer

Due diligence is the investigation period after signing a contract but before closing. For buyers, this includes property inspections, environmental assessments (Phase I/II), title review, survey, and lease audits. Florida contracts typically allow 30-60 days with the right to terminate and receive your deposit back if issues arise.

Question 10

Q: What's the difference between usable and rentable square footage?

Accepted Answer

Usable square footage is the space inside your walls. Rentable square footage includes usable space plus a share of common areas (lobbies, hallways, restrooms). The "load factor" typically adds 10-20% to usable space. You pay rent on rentable square footage, so always clarify which measurement when comparing spaces.

Question 11

Q: What is a letter of intent (LOI)?

Accepted Answer

A letter of intent is a non-binding document outlining key terms of a proposed lease or purchase before drafting formal contracts. LOIs cover rent, term, TI allowance, free rent, options, and major contingencies. While non-binding, LOIs set expectations and reduce wasted legal fees. We always recommend negotiating via LOI first.

Question 12

Q: What is a personal guarantee?

Accepted Answer

A personal guarantee makes you personally liable for lease obligations if your business cannot pay. Landlords request guarantees from small businesses or new companies. Negotiation strategies include limiting the guarantee to a certain dollar amount, reducing it over time ("burning off"), or capping it at 12-24 months of rent.

Question 13

Q: What does "vanilla shell" mean?

Accepted Answer

Vanilla shell (or white box) describes a space with basic finishes: concrete floor, drywall painted white, drop ceiling grid, HVAC stubbed, electrical panel installed, and restroom rough-in. Grey shell is more basic, no ceiling, no interior walls, sometimes no HVAC. Understanding delivery condition affects your buildout budget.

Question 14

Q: Can I sublease my commercial space?

Accepted Answer

Most commercial leases allow subleasing with landlord approval. You remain liable under your original lease, so the subtenant's failure to pay still falls on you. Landlords often require the subtenant to meet similar credit standards and may want to recapture the space if sublease rates significantly exceed your rate.

Question 15

Q: What are typical commercial lease terms in Brevard County?

Accepted Answer

Most commercial leases run 3-5 years, with larger tenants signing 5-10 year terms. Retail landlords often require 5+ years. Annual rent increases of 2-3% are standard. Renewal options (typically 5-year options at market or capped rates) are negotiable and valuable.

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