Commercial Lease Analyzer

Commercial Lease Analyzer

Analyze commercial leases (office, retail, industrial, warehouse) for hidden costs, unfavorable terms, and negotiation leverage. Use when reviewing a new lease, renegotiating a renewal, or comparing multiple lease options.

When to Use

Signing a new commercial lease

Lease renewal negotiation

Comparing multiple lease proposals

Auditing existing lease for cost reduction

Subleasing or assignment analysis

What You Need from the User

1. Lease type: Office, retail, industrial, warehouse, mixed-use 2. Lease terms: Base rent, term length, renewal options 3. Cost structure: NNN, modified gross, full-service gross 4. Square footage: Usable vs rentable (load factor) 5. Location/market: City, submarket (for comp analysis)

Analysis Framework

1. Cost Breakdown (True Occupancy Cost)

Base Rent ($/SF/yr)
+ CAM Charges (Common Area Maintenance)
+ Property Tax Pass-Through
+ Insurance Pass-Through
+ Utility Estimates
+ Parking Costs
+ Janitorial (if not included)
= Total Occupancy Cost ($/SF/yr)
÷ 12 = Monthly Cost
× Term = Total Lease Liability

2. Load Factor Analysis

Rentable SF ÷ Usable SF = Load Factor
Industry benchmarks:
Class A Office: 1.15-1.20 (15-20% common area)
Class B Office: 1.12-1.18
Retail: 1.05-1.10
Industrial: 1.02-1.05
Flag if load factor > benchmark. Every 1% = real money.
Example: 5,000 USF at 1.20 = paying for 6,000 RSF
At $30/SF = $30,000/yr for hallways and lobbies

3. Escalation Modeling

Project total cost over full term including:

Fixed increases: 3% annual is standard. Flag >3.5%

CPI-linked: Model at 2.5%, 4%, 6% scenarios

Market reset: Compare to projected market rents

CAM escalation caps: If uncapped, model 5-8% annual increases

Output a year-by-year cost table showing base rent, estimated CAM, total cost.

4. Critical Clause Review

Red Flags (flag immediately):

Personal guarantee without sunset clause

Demolition clause (landlord can terminate for redevelopment)

Radius restriction >3 miles (retail)

Continuous operation clause without co-tenancy protection

Uncapped CAM with no audit rights

Relocation clause (landlord can move you)

No assignment/sublease rights

Holdover rate >150% of final rent

Yellow Flags (negotiate):

No rent abatement for construction delays

No exclusive use clause (retail)

HVAC maintenance fully on tenant

No cap on controllable operating expenses

Restoration clause requiring original condition

No early termination option after year 3-5

Insurance requirements above standard

Green (Standard/Favorable):

TI allowance ($30-60/SF office, $15-30 retail)

Free rent period (1 month per year of term)

Right of first refusal on adjacent space

Renewal option at fair market value

CAM audit rights

Assignment rights with reasonable consent

5. Negotiation Leverage Points

Based on market conditions, identify:

Tenant's market (vacancy >15%): Push for higher TI, more free rent, lower escalations

Landlord's market (vacancy <8%): Focus on caps, flexibility clauses, termination rights

Balanced (8-15%): Standard negotiations, pick 3-4 priorities

Rank negotiation items by dollar impact over lease term.

6. Comparison Matrix (Multiple Options)

If comparing leases, output a side-by-side table: | Factor | Option A | Option B | Option C | |--------|----------|----------|----------| | Effective Rent ($/SF) | | | | | Total 5-Year Cost | | | | | TI Allowance | | | | | Free Rent (months) | | | | | Escalation Type/Rate | | | | | Termination Option | | | | | Load Factor | | | | | Parking Ratio | | | |

7. Financial Impact Summary

Total lease liability (ASC 842 / IFRS 16)

NPV of all lease payments (discount at 6-8%)

Break-even occupancy cost per employee

Cost per revenue dollar (if revenue data provided)

Output Format

LEASE ANALYSIS: [Property Address]
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
VERDICT: [FAVORABLE / NEGOTIATE / WALK AWAY]
TRUE COST
Monthly: $XX,XXX
Annual: $XXX,XXX
Full Term: $X,XXX,XXX
Per Employee: $X,XXX/mo (at XX headcount)
RED FLAGS: [count]
[List with dollar impact]
TOP 3 NEGOTIATION PRIORITIES:
1. [Item] — potential savings: $XX,XXX over term
2. [Item] — potential savings: $XX,XXX over term
3. [Item] — potential savings: $XX,XXX over term
YEAR-BY-YEAR PROJECTION:
[Table]

Industry Benchmarks (2025-2026)

| Market | Office ($/SF) | Retail ($/SF) | Industrial ($/SF) | |--------|--------------|---------------|-------------------| | NYC | $65-85 | $80-200+ | $18-25 | | SF/Bay | $55-75 | $45-80 | $15-22 | | LA | $40-55 | $35-65 | $14-20 | | Chicago | $28-42 | $25-50 | $8-12 | | Dallas | $25-38 | $22-40 | $6-10 | | Miami | $42-58 | $40-75 | $12-16 | | Atlanta | $25-35 | $20-38 | $6-9 | | Denver | $28-40 | $22-38 | $8-12 | | Austin | $35-48 | $28-45 | $10-14 | | National Avg | $32-45 | $25-45 | $8-14 |

TI allowances: $30-60/SF (office), $15-30/SF (retail), $5-15/SF (industrial) Free rent: 1 month per year of term is standard in balanced markets

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