Retail Lease Terms to Know

Are you planning to sign a lease to open your new retail business soon?  If so, here’s 5 terms that you might see in your new retail space lease.  Understanding these terms will help your new retail store opening go more smoothly. 

1. NNN (also known as Triple Net) – Many leases are what’s called triple net (NNN).  This means that in addition to rent, the tenant also pays a share (usually its “pro rata” share – see below) of the shopping center’s insurance, taxes and common area maintenance (see below for details) costs.  Your retail lease will explain if you are required to pay this and outline how your share is calculated.
2. Pro rata – Often businesses pay their proportionate share of the shopping center’s tax, insurance and/or common area maintenance costs.  To calculate proportionate share, divide the businesses’ square footage by the total square footage of the shopping center. (Ex: A retail store leasing 1,500 square feet of space in a 150,000 square foot shopping center would have a pro rata share of 1%.)
3. Common Area Maintenance (also called CAM) – Common Area Maintenance includes all of the maintenance, repairs, etc. that are required to operate a shopping center and benefit all of the businesses in the center. Examples include parking lot sweeping and landscaping.  Your retail lease will define what is considered part of common area maintenance for that property.
4. Buildout period – This is the period of time between when you sign your lease and take occupancy or open for business.  This is when you are adding shelving, painting, etc. 
5. Sales reporting – Many leases require the retail business to report sales volume to the landlord either monthly or annually.  This is to help the landlord understand how the shopping center – and your retail business – is doing.