The importance of conducting a financial analysis of an office lease

If you are searching for an office in the commercial office market in Niagara or Hamilton, one that makes the best sense for your business financially and operationally, you should be conducting a financial analysis of each lease proposal. Entering into a lease is a long term decision decision for your company and a financial analysis will allow you to have transparency and complete understanding of the financial implications of that decision. Lease proposals include complicated and detailed outlines of the terms and conditions of the lease. A financial analysis effectively breaks down the financial impacts of the terms and conditions to get a true cost of your lease over its term. As you can see, a financial analysis is a great tool to use to compare your lease proposals.

Evaluating your lease proposal

The concept of leasing office space seems simple on the surface but commercial office building leases are financially complex. Office lease agreements will outline any cost based contractual obligations your lease will include. Your lease may include the following items should be considered when conducting a financial analysis: improvement allowance, parking charges, interest fees, fees for construction management, lease options such as cancellation or expansion, electrical/h.v.a.c. charges, caps for operating costs, add on’s and finally your base rent payments. There are many factors that affect your lease which makes a financial analysis a complicated process. Unless you are a financial expert, you may want to search out ways to simplify the process such as using an online lease transaction program or by contacting a knowledgeable commercial real estate broker.

 

Comparing leases financial analysis results

Not all leases are structured the same but your financial analysis of an office lease results will allow you to look at each lease proposal on a common level. The analysis will break down your costs by month, year and by full  term lease so that you have a true picture of the finances of your lease agreement.  Apart from the financial clarity that an analysis will give to you, these results can be used as a tool to negotiate with.

 

Conducting a financial analysis of each property you are considering is a lot of work, a well versed commercial real estate broker could be your answer to help make the process make sense to you. Click here to read more about commercial real estate metrics.

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