Look beyond the headline rent.
A practical framework for evaluating industrial lease economics.
A quoted rental rate is a starting point. To understand what a lease means for an industrial asset, compare the cash flows, obligations, and timing behind it.
Put proposals on the same basis.
Confirm whether rent is quoted annually or monthly and whether the lease is gross, modified gross, or net. Document the expenses each party pays and the assumptions behind reimbursements.
Separate face rent from the full economics.
Include free rent, tenant improvements, landlord work, commissions, escalations, and the term. Compare cash flows over a consistent period; any present-value calculation should disclose its discount rate and assumptions.
Evaluate the obligations.
Review repair and replacement responsibilities, renewal options, assignment provisions, and any guarantees with appropriate advisers. The economic effect may differ from the apparent rental premium.
Account for timing and rollover.
Consider commencement conditions, delivery commitments, expiration dates, and potential downtime. A longer lease is not automatically the best fit for every asset or owner.
Test the assumptions.
Ask how the outcome changes if operating expenses rise, a tenant leaves, or future leasing costs exceed the base case. Use property-specific evidence before choosing a forecast.
The better comparison is the one with consistent assumptions and visible costs.
This educational framework should be applied using property-specific assumptions and current lease terms.