If you own a business, chances are you’ve heard of both commercial and industrial leases. But what’s the difference? Both types of leases have their advantages, so understanding the differences between them is key when deciding which one is best for you. Let’s break down the major distinctions between these two types of leases.
Retail Businesses vs. Factories
The first major difference between commercial and industrial leases lies in what type of businesses each one caters to. Commercial leases are intended for retail businesses that serve customers, such as restaurants, storefronts, or offices. These spaces usually consist of smaller premises with plenty of foot traffic and are located in areas with good visibility to customers. On the other hand, industrial leases are designed for larger companies that manufacture goods or provide services that require larger premises. This could include factories, warehouses, or manufacturing plants.
Another big factor that distinguishes commercial and industrial leases is their respective lengths. Commercial leases tend to be short-term—usually anywhere from 1 to 5 years—while industrial ones tend to range from 5 to 20 years, depending on the agreement between landlord and tenant. This extended length for types of leases gives commercial tenants more time to establish themselves in a particular area without having to worry about relocation costs every few years.
Rent and Security Deposits
Commercial and industrial tenants may also be subject to different rent prices as well as security deposits depending on their different types of leases. Commercial tenants typically pay higher rent than those with an industrial lease, since they occupy smaller premises located in more desirable areas. However, they may not be required to pay as large a security deposit as those with an industrial lease agreement. This is due to the shorter lease length mentioned above. Industrial tenants usually pay lower rent but may have to make up for it by paying a larger security deposit due to their longer lease commitment periods.
Restrictions for Both Types of Leases
Finally, restrictions can differ greatly between commercial and industrial tenants depending on their use of the premises, and any particular regulations outlined by the landlord in their lease agreement. For instance, while most commercial tenants will be able to freely customize their space according to their needs (e.g., installing additional shelves or counters), many landlords impose stricter restrictions on how much customization can take place within an industrial space. This is due to the potential safety hazards associated with certain activities, such as welding or using heavy machinery inside factory buildings or warehouses.
Things to Keep in Mind for Any Lease
When considering a commercial or industrial lease, it’s important to keep the following in mind:
- Make sure you read and understand all of the terms in the lease agreement before signing.
- Ensure that you have sufficient funds (or access to funds) for any security deposits, rent payments, and other costs associated with the lease.
- Consider the location of the premises and how it could potentially impact your business in terms of visibility, foot traffic, and other factors.
- Make sure to inquire about any restrictions that may apply to your particular type of lease agreement before signing.
By taking these points into consideration, you can make an informed decision about which of these types of leases best suits your business needs.
Despite their differences, both commercial and industrial types of leases of legally binding agreements need to be respected and followed by all parties involved. It’s important to understand the nuances between these two types of leases before signing any documents in order to ensure a successful agreement for all involved.
Schwarz Properties is your one-stop shop for commercial and industrial rentals. Our team understands the difference between types of leases, so we can work with you to find the best option for your business. Let us help you find a space that’s the perfect size, location and price for your exact needs. Plus, our experienced team will guide you through the entire process, from signing documents to setting up utilities. Contact us today to get started!