What Are Commercial Occupancy Costs and How Can You Reduce Them?

When you lease an office space or other commercial property, you’ll have more expenses than just your basic rent. To create your budget and assess your real estate portfolio, you must analyze your total occupancy costs. We’re here to help you understand what is included in your occupancy costs and to find ways to reduce them.

What makes up your occupancy costs?

Rent

Your rent is the lease rate or the amount of money that you agree to pay in order to occupy a specific business space. Rent is often the largest part of your occupancy costs.

Taxes and insurance

When you’re the tenant of a commercial property, you’ll be responsible for paying a certain percentage of the building insurance and taxes. The general liability insurance that your business is responsible for will also add into your occupancy costs.

Common area maintenance

Common area maintenance is the amount of money you pay to cover the costs of shared areas such as lobbies, parking facilities, and elevators. All these add up to your occupancy costs.

Utilities

In some leases, your utilities such as water, electricity, sewage etc. are excluded from your rent and then added to your total occupancy costs.

Other services

All properties need maintenance, repairs and other services, which will be included in the occupancy costs. These other costs may include water service and repairs, plant services, security services, equipment rental, cleaning services, and pest control services.

How can you reduce your occupancy costs?

Negotiate a fair lease

Before you sign your first lease or renew your current lease, research the current market appropriately to avoid paying more for less. You should also consider extending your lease terms, so you can get the leverage to negotiate for reductions in common area maintenance fees and rents. If you’re nervous about negotiating your lease alone, you can make the process easier by having a tenant representation broker on your side. With such a broker, you can walk away with fewer expenses and a more favorable lease signed.

Consider rearranging work schedules

If you enable your employees to telecommute on a full-time or part-time basis, you can significantly cut down the amount of square footage that your business requires. The employees that will only be in the office part-time can share office spaces with others. Remote work can also reduce your utility costs and other services such as water service and furniture rental.

Go green

You can slash your occupancy and utility costs by making your office space more eco-friendly. You can go green by investing in LED lights and using more natural lighting during the day. Also, restrict access to your office thermostat or get a smart thermostat that automatically lowers the heating and air conditioning after business hours. You can decrease the amount of electricity that your office consumes by using Energy Star-certified computers and office equipment.

Get your real estate team on board

Don’t make all your decisions all alone, but instead get your real estate team on board. In many cases, the decisions you make can have unexpected consequences on your occupancy costs. By inviting members of your real estate team to strategic planning and management meetings, you can have their advice and input to guide your decisions and figure out possible increases in expenses based upon your new policies, initiatives or procedures.

Commercial occupancy costs add up, but yours don’t have to break the bank. By being aware of costs, making adjustments and consulting your real estate team, you can reduce your total occupancy costs and have a more pleasant experience as a tenant.