What is an Industrial Gross Lease?
An industrial gross lease which is sometimes referred to as a modified gross lease is a type of lease commonly used for industrial properties. These leases are meant to be mutually beneficial to property owners and industrial tenants. In an industrial gross lease, the tenant is responsible for some, but not all operating expenses incurred at the property. Typically, the operating expenses will be factored into one monthly payment to the landlord in addition to the agreed upon rent.
The term industrial gross lease has broad meaning, and these are usually heavily negotiated to fit the specific needs and wants of the landlord and tenant at each site. This is an attractive arrangement for industrial tenants who wishes to make a single payment to the landlord for operating expenses as opposed to assuming complete responsibility like in a triple net lease.
Pros and Cons of an Industrial Gross Lease
An industrial lease arrangement offers advantages to both property owners and tenants. Property owners can minimize their financial risk by having tenants assume partial responsibility for operating expenses. An industrial gross lease offers tenants a location for their business and extended controls without assuming all of the risks and expenses associated with being a property owner.
Property owners and investors should keep in mind that an industrial gross lease arrangement will require them to oversee and manage the property and assume most of the financial responsibilities related to being a landlord. An industrial gross lease is not the most hands off arrangement for a property owner who wishes to limit their involvement in managing their property. Tenants should consider whether they have the financial means to make the increased rent payments each month covering some of the property’s operating costs.