The Michael Bloom Realty Company Team is here to help. We stand ready to answer all your questions, and to help you navigate the ins and outs of industrial real estate in Denver.
Below are answers to some of the questions we hear most frequently. We’ve also included a short glossary of common terms. We’re happy to provide more details.
Glossary
What are the most common real estate terms used to discuss industrial and warehouse space in Metro Denver?
Base Year
The calendar year in which the lease begins. This terminology usually refers to expenses that are included in the rent for the first year of the lease. If costs go up in subsequent years, the lease will provide that the Tenant will pay its share of increases over the (first-year) base-year expenses, which usually include taxes, insurance, and common area maintenance.
CAM or CAC
These letters stand for Common Area Maintenance or Common Area Costs, which usually includes all exterior maintenance and repairs such as parking lot cleaning, exterior lighting, snow removal, exterior painting and cleaning, landscape maintenance, etc. Sometimes people use the term “CAM expenses” to refer to common area maintenance plus taxes and insurance, which are the three categories of expenses for a triple net (or NNN) lease.
Clear Height
The usable height in the building, clear of any obstacles, from the floor to the bottom of the lowest roof joist.
Dock High
Overhead door and loading at the level of a semi-truck bed.
Drive In
Ground-level access and loading.
Eminent Domain
No matter who legally owns a property, any city, state, county, or federal government has the right to take the property for a public use, so all industrial leases in Denver have a provision covering that possibility. However, it is very rarely used.
Gross Lease
Denver warehouse space leases that are considered “gross leases” include all expenses in the monthly rental rate with no additional expenses billed back to the Tenant. With a gross lease, as with all industrial leases, the Tenant is responsible for its own utilities.
High Cube
High cube warehouse space is industrial space designed to maximize storage capacity with open floor plans and high ceilings, typically at least 20 feet in height.
Modified Gross Lease
With a modified gross lease, in addition to base rent, the Tenant participates in its share of building expenses such as taxes, insurance, and common area maintenance if these expenses go up over the base year, which is the first year of the lease.
Rail Served
The building is adjacent to a rail line with a spur to the building, providing the ability to load and unload rail cars from the building.
Rail Served
The building is adjacent to a rail line with a spur to the building, providing the ability to load and unload rail cars from the building.
Right to Relocate
Many warehouse leases include a provision that gives the landlord the right to relocate a Tenant –– usually within the same complex — at the Landlord’s expense. This provision is rarely exercised, but it may become necessary if (for example) a smaller tenant occupies space between two vacant spaces, which interferes in the ability to combine the spaces for a large user.
Subrogation
This is an insurance term that allows an insurance company to pay a loss to the covered party but pursue reimbursement from a third party who may have been at fault.
Triple Net (or NNN) Warehouse Leases
These leases provide that the Tenant is responsible for all costs associated with their warehouse space or building, including taxes, insurance, and maintenance. For a multi-tenant building, these expenses are apportioned to the Tenants based on their square footage.
FAQ
What do the terms net lease, triple net lease, gross lease, or modified gross lease mean?
- For most warehouse space in Denver, net, triple net, and NNN leases are terms that are used interchangeably for situations where the Tenant is responsible for all costs associated with the warehouse space, including taxes, insurance, and maintenance. For a multi-tenant building, these expenses are apportioned to the tenants based on their square footage.
- A gross lease reflects that the Landlord is paying for these costs.
- A modified gross lease indicates that the Landlord is paying the costs up to and including the base year (which is the first year of the lease), and the Tenant is paying its share of any increase in costs over the base year. On any type of warehouse lease, the Tenant always pays its own utilities and personal property insurance, and usually its own trash removal.
How long a lease do I have to sign?
- Most industrial leases are 3-5 years. Normally, our minimum is 2 years, depending on the property.
- For any lease less than 3 years, the tenant typically has to take the space in “as is” condition.
Will the landlord remodel the space for my needs?
- Remodeling space for an industrial lease is referred to as tenant improvements, or TIs.
- The amount of tenant improvement the Landlord is willing to do depends on the length of the lease, the creditworthiness of the Tenant, the price per square foot, and the nature of the improvements.
How much is a typical security deposit for warehouse space in Denver?
- Most industrial Landlords require a security deposit equal to the amount of the last month’s rent and NNN charges.
What does CAM mean, and what is included?
- CAM stands for Common Area Maintenance. It refers to all the costs of maintaining the common areas, including snow removal, parking lot cleaning, parking lot repairs, landscape maintenance, parking lot lighting, exterior building lighting, roof repairs, water, sewer (unless separately metered), and so on.
- Although not technically correct, Landlords, Tenants, and leases often refer to CAM charges to include common area maintenance, taxes, and utilities, lumping all three together under the convenient term “CAM.”
Who pays for maintenance and repairs to the space itself?
- Industrial leases in Denver can vary widely. Usually the Landlord takes care of the exterior, roof, and building structure (sometimes but not always billed back as CAM charges), and the Tenant is responsible for everything on the interior of the premises, including electrical, plumbing, HVAC (including the rooftop unit), utilities, etc., as well as plate glass.
- There are exceptions to this, so be sure to read your lease to understand who is responsible for what.
Who pays for repairs to the heating and cooling systems?
- With most Denver warehouse leases, the Tenant is responsible for HVAC repairs.
- There is sometimes an exception if a unit (rooftop or hanging heater) needs to be completely replaced. This is the “trickiest” part of a lease.
- A heating and air conditioning unit serving the office area can cost between $4,000 and $6,000 to purchase and install.
Who pays for utilities?
- The Tenant is always responsible for its own utilities, including heat, light, gas, electrical, phone, internet, etc.
- In a single-tenant building, the Tenant is also responsible for water, sewer, and storm drainage.
- In a multi-tenant building, water, sewer and storm drainage costs are paid in CAM and apportioned on the basis of square footage.
Who is responsible for security?
- Security is the Tenant’s responsibility.
How much does warehouse space cost in Denver?
- There is a wide range of pricing for industrial space in Denver depending on location, type of space, size, and features, so it’s almost impossible to answer this question. Please contact us and we’ll be happy to quote you some specific rates.
- TIP: To calculate how square foot price translates to monthly rent, multiply the price by the square footage and divide by 12. For example: 5000 SF x $4.50 PSF = $22,500 ÷ 12 = $1875.00 per month.
Will my rent be a flat rate, or will it increase over the term of the lease?
- Most industrial leases will have annual base rent increases over the length of the lease.
- Sometimes, increases are a set dollar amount; sometimes, they are tied to the Consumer Price Index (CPI).
Is warehouse space cheaper in areas outside of Denver such as Aurora, Montbello, or Lakewood? Is being near the airport or near a major highway more expensive?
- There is a range of prices for industrial space in every area. Please contact us to let us know what area you are looking in, and we’ll be happy to provide you with some information about pricing options and available spaces.
What is dock high or drive in loading? And do I have to choose between one or the other?
- Dock high is an overhead door at the height of a semi-truck bed so that a truck pulls up and loads or unloads at truck level.
- Drive in means the overhead door is at ground level.
- Most warehouse spaces provide one or the other, but there are many that provide both.
Do all warehouse spaces have three-phase power?
- The majority do, but not all. So it’s important to ask about your power needs when you call to inquire about a space.
Is it better to be in a single-tenant building or a multi-tenant complex?
- The advantage to being in a single-user building is that outside storage or yard space is an option.
- Typically, you can’t find those features in multi-tenant buildings or complexes.
Can I run a retail location out of warehouse space?
- Typically the answer is yes, but each municipality has its own regulations and limitations governing retail sales in industrial zoning. For example, in Denver, 20% of your floor space can be used for retail sales.
- If retail sales are part of your business, ask about this upfront when looking at industrial space.
Is it smarter to lease warehouse space or purchase a building?
- The answer to this question depends on a number of important factors and can’t be answered in a general way. Contact us to discuss your needs and options.