Tag: Blog

Opinion of Lease Rate


Are you a Landlord with a commercial / industrial space for lease?

A Landlord needs a real estate professional to assist in selecting the Tenant for the property as well as effectively placing the commercial or industrial property for lease on the market.  Leasing a commercial real estate property requires a lot of research and planning as well as a lot of leg work in finding the right business to occupy the space.  Target Realty Corp. will do all the work – while you continue to run your day-to-day operations.

but first – we need to established the lease rate.

Unlike sales statistics, there is no requirement to report commercial lease rates within our industry.  Lease rates are not public information.  We gather our information internally and from our industry contacts.

We consider current net asking rates for the Calgary market, the most comparable deals completed in the last year, and trends for comparable land and building size range, function and location.  We consider the specifics of your location: transportation and bus routes; age, quality, and construction of the building; offsite improvement; site specifics; business neighbours; environmental concerns.

The considerations used to value the properties and conversion of that value into a market lease rates involved the following:

Land Value ~ Building Value ~ Building Features Value

Market Comparables ~ Market Capitalization Rates ~ Today’s Comparable Options

Opinion of Value


What is a “Realtor Opinion of Value” (ROOV)?

As part of the real estate transaction process, the first thing that needs to get done is establish a sale value of a commercial property.

Property owners requiring an opinion of value, but who do not require a formal appraisal can use the service of a commercial real estate brokerage.

How is a “ROOV” determined?

Three generally recognized methods can be applied to evaluate the property;  the cost Approach, the Income Approach and the Direct Comparison Approach.

Value by the Cost approach is determined by adding the land value to the replacement cost of the improvement less depreciation.  The Income Approach involves the capitalization of a property’s net income or “potential” net income at an appropriate market rate, into an indication of value.  The Direct comparison is applied by comparing the subject property to similar properties that have sold recently or are on the market.

What information is included in a “ROOV” ?

  • Description of the property’s physical characteristics
  • Description of the neighborhood in which the property is situated
  • Historical and current market data
  • Property photographs
  • Sales comparables
  • Comparable properties for sale
  • Market valuation
  • The realtor’s opinion of current market value

How Does The Commercial Real Estate (CRE) Industry Work?


How does the commercial real estate (CRE) industry work?


Most owners of commercial real estate hire real estate agents to lease their property on their behalf. The real estate agent’s responsibility is to represent the owner in leasing the property


What is the difference between a leasing agent and a tenant representative?

The leasing agent has the listing of the property and represents the interest of the owner of the building. A tenant representative (rep) represents the interest of the tenant in the lease. Some agents work exclusively on listing while others take on tenant representation only. Other agents will work with both.


Why should I use a broker (agent) if I have an attorney?

A knowledgeable broker, who is a vital part of your team of professionals, uses comprehensive marketing expertise and valuable resources to ensure maximum results in every lease transaction. Using an experienced brokerage firm will complement the rest of the team allowing others to do what they do best in their profession.


I’m thinking about moving my office or leasing a new office. Where do I start?

The first thing is to decide if moving into a new space is the right choice. Ask the following questions:

  • Do we want to find space on our own or hire a tenant representative to assist us?
  • Is it a good time to move?
  • How important is location?
  • How much space do we need?
  • How much can we afford?
  • On what date do we need to move into a new space?
  • How will the new space benefit the company and its future?
  • What does it cost to move?
  • What else is involved in moving (furniture, phones, computers, copy/fax/postage machines, internet access, etc.)?
  • Can we afford to lose business or employees during the transaction?

Brokers generally work in two capacities: as a listing agent or as a tenant representative. Some, if not most, do both. This means that they have property listings and they also work as a tenant representative. If you work directly with the property listing agent, keep in mind that the listing agent is representing the property owner. If you hire a tenant representative, you should consider hiring an exclusive tenant representative that has no property listings. This will ensure you that the tenant representative is working solely for you.


What is a representation letter or exclusive agreement and should I sign one?

A tenant representative will present you with a representation letter to sign for your own protection. The letter protects you by stating that you are working with only one tenant representative. It also protects the tenant representative by ensuring that they will get paid if a lease is signed. If a tenant representative does not have a signed letter from you, they will most likely only perform a simple property search. If you want to get the most out of the brokerage community, we recommend that you sign an exclusive agreement instead of working with several agents on a non-exclusive basis.


Is finding a space without hiring a broker a good idea?

Generally speaking, the answer is no. You, as a tenant, enter into a lease every so often. A broker, however, deals with leasing negotiations daily. Think of it this way: Would you go into an IRS office without having your CPA as a representative? Again, the answer is no.

Now that I’ve hired a tenant representative, what should I expect from them?

You should expect your tenant representative to think only of your interest and to give you advice. The tenant representative helps you determine how much space you need, what is your most important selection criteria, and then find and negotiate the space that best fits your needs. When it comes to the negotiation, make sure your tenant representative knows what is important to you.

Commercial Real Estate Leasing Buzzwords:

Commercial Real Estate Leasing Buzzwords


#1 Triple Net Lease – Have you ever heard someone refer to “triple net” when discussing a commercial real estate lease? Triple Nets are the operating expenses that a tenant is responsible for paying in addition to base rent in a triple net lease. The three “nets” are property taxes (n1), property insurance (n2), and common area maintenance (n3). Typically the tenant pays their pro-rata share (proportionate share of tenant’s total leasable square footage in relation to the building’s gross leasable space) of these expenses in a triple net lease in addition to base rent. Triple Net Leases are common in retail leasing. We have seen a growing trend of triple net leases occurring in office and industrial as well.


#2 Add-on Factor – Have you ever wondered what the difference between “leasable” and “usable” square footage is? The “Add-on Factor” is the difference between the leasable and usable area of an office building commonly expressed as a percentage of the rentable area. An “Add-on Factor” is common in multi-tenant office buildings where there is a great deal of common area. Elevators, lobby area, community bathrooms, and hallways can all contribute to the “add-on” factor that a tenant pays for in addition to their “usable” square footage. Add-on factors are most common in office building leases.


#3 TI Allowance – “TI Allowance” or Tenant Improvement Allowance is an allowance that the landlord provides the tenant to build-out or modify the tenant’s lease space. TI allowances are negotiable much like rental terms.


#4 Second Generation Space – Second Generation Space is a term relating to office space that has had a prior tenant. The importance to the space having a prior tenant is that some (if not all) of the improvements can be reusable by the new tenant.


#5 Shell Space – Shell Space or 1st Generation Space is a term relating to office space that has not had a previous tenant. Unlike Second Generation Space, the tenant should expect to contribute a substantial amount of capital towards the improvements. Shell Space typically comes with a higher TI Allowance from the landlord than Second Generation Space.


#6 Grade Level vs. Dock High – These are common terms that you will hear when leasing industrial space. Grade Level refers to loading/unloading areas that are at street level. Dock High refers to industrial space that comes with a loading dock.