WHAT IS A FULL SERVICE LEASE?
A Full Service Lease is typically defined as a lease that has one, all-inclusive rental rate that includes both the base lease rate and the operating expenses (property taxes, insurance and common area maintenance) combined into one number for the first year’s lease rate.
For example, if you leased a 3,000 SF space with a $30 per SF Full Service Lease Rate, the breakdown of payments would be:
Full Service Lease Rate: 3,000 SF x $30 per SF = $90,000 per year or $7,500 per month
Included in the $7,500 per month amount is both the base lease rate and the operating expenses.
With a Full-Service Lease, the Tenant is generally still responsible for any increase in the operating expenses in year 2 of the lease and beyond. The increases are typically determined by whether the lease contains a “Base Year” or “Expense Stop”. An important aspect of a Full Service lease is to understand if the utilities and janitorial are included in the lease rate or if they are billed separately to the tenant, and how any increases in operating expenses will be “passed through” to the tenant.
Full Service Leases are typically found in Office Buildings. You can also see them in some industrial or warehouse properties.