Richard Crenian on Net Leases: The True Cost for Landlords

The term “net lease” (and terms like “double net” or “triple net”), in commercial real estate, gets tossed around a lot. For those unfamiliar, it essentially means a tenant agrees to pay  for some or all of the operating expenses of a property, in addition to their base rent. This might include property taxes, building insurance, and general maintenance.

You’d think this gives landlords an easy path to consistent profits. Unfortunately, it’s not that simple. Here’s a breakdown of some hidden costs even net leases don’t eliminate:

Attracting Tenants: The Need for Incentives  Every day a space sits empty is lost income. If the market has a lot of vacancies, landlords get pressured. Offering six months to a year of free rent isn’t uncommon to get that first tenant signature. Moreover, tenants, especially desirable national chains, often have significant bargaining power. They might demand that the landlord contributes to “tenant improvement allowances,” helping fund interior renovations to suit their brand. Offering incentives to attract tenants and preserving profitability requires a delicate balance. Landlords must carefully assess the long-term financial implications of these incentives, ensuring that they do not outweigh the benefits gained from net lease agreements.

The Illusion of Full Occupancy: When Appearances Deceive  A packed building doesn’t always equal a packed bank account for the landlord. Each tenant is likely on a different lease cycle. Many could be enjoying those incentives mentioned earlier. Additionally, with retail properties particularly, it’s crucial to look at percentages. Some tenants pay a base rent plus a percentage of their sales. If sales are weaker than projected, the landlord gets squeezed even with a “full” building. Conducting thorough financial analyses is needed to uncover the hidden costs of seemingly full occupancy. Landlords must assess the stability and sustainability of their rental income, accounting for potential fluctuations in tenant performance and market conditions.

Due Diligence is King: Don’t Be Fooled by Labels  “Net lease” sounds great, but deeper analysis is always the wise move. Before acquiring any commercial property, go over the rent rolls with a fine-tooth comb. How long are the current leases? What are the actual costs, not just the theoretical ones passed to the tenants? And critically analyze the local market. Is this area in a growth period, or could vacancies become your future problem? Understanding the broader market dynamics is paramount. Is the local market experiencing growth, or are vacancies on the rise? By conducting thorough due diligence, landlords can mitigate risks and make informed decisions that align with their investment objectives.

Being a commercial landlord has its ups and downs. Net leases are one of those things that definitely lean towards the “up” side. Net leases are a useful structure, but landlords need to enter with open eyes.  Potential marketing costs, tenant incentives, and careful market analysis must factor into your decisions.  Commercial real estate success comes from understanding the complete financial picture. With a net lease, you know what monthly rent check is coming in. Tenants take on the stuff that fluctuates – taxes, insurance, repairs. Can you say “peace of mind”?  This kind of stability is gold when it comes to planning your business. Another major plus is ditching a big chunk of the landlord’s to-do list. Net leases hand a lot of those day-to-day hassles off to the tenant.  This is a game-changer, especially if you don’t want to be on-call 24/7 or if you manage several properties. 

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Final Construction Phase for Bayside Toronto

Commercial real estate investors are constantly searching for ways to keep their funds moving and growing. Toronto continues to prove be a magnet for CRE investors and projects similar to Bayside Toronto, a luxury waterfront development located in the East Bayfront. These projects and their investor’s funds continue to work for them even during covid-19.


T3 Bayside

T3 Bayside will also be a mixed-use space, except it will have commercial use. It will feature offices and retail properties, all leased by the CBRE Group, Inc.

This part of the Hines’ project will include two mixed-use buildings, which will occupy over 500,000 square feet of space. Due to the high market demand and the sustainable build (the two T3 buildings will use mass timber for construction), they’re expected to attract many tenants.


Bayside Toronto

Bayside Toronto is one of the biggest Canadian commercial real estate projects by Hines, an international real estate agency, and this project is speeding up its development. Together with other investors Hines, just like ReDev Properties, are creating a mixed-use spaces that includes retail, offices, condos, cultural venues, restaurants, and shore promenades in Toronto.

Aqualuna is the fourth and final construction phase of the Bayside Toronto project. The other three include Aqualina, Aquavista, and Aquabella, all of which are luxury condominium complexes at the waterfront.

Aqualuna is also primarily a condo complex that’s a joint venture of Hines and Tridel, a Toronto-based real estate developer. Nevertheless, it will also feature a large retail space – about 18,000 square feet on the ground floor. Its total 468,000 square feet of space will also house a luxury lounge, an amenity terrace, and a pool overlooking Lake Ontario.


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Toronto Mixed-Use, Multi-Tower Redevelopment

Upgrades to the commercial districts of Toronto, Ontario are always welcomed by retailers and CRE investors alike. And this time, it’s the Golden Mile district mixed-use redevelopment that’s set to undergo massive changes. This redevelopment project is expected to attract more visitors and more foot traffic. With everything going according to plan, Golden Mile’s multi-tower project is on the path to becoming the hottest part of town.


Plenty of Green Spaces 

While the multi-tower mixed-use redevelopment project initially suggested a total of 3,500 m² for parks and open spaces, the area’s been increased to astonishing 5,694 m².

This comes as great news for retailers who are expecting an increase in foot traffic. After the coronavirus pandemic’s been put under control, consumers are expected to flock to parks and open spaces and enjoy greater freedom once again, which will inevitably lead to more interest in brick-and-mortar shops, cafes and restaurants nearby, and subsequently more spending.


What This Means for Canadian CRE Investors 

With the proposed redevelopment project in Toronto, everyone’s showing greater interest in the Golden Mile district. From potential new renters in the area to business owners looking for new office space and excited retailers who are looking to increase their sales – everyone is excited to see this project succeed.

Now is a good time to invest in retail CRE in Ontario and receive a higher return on investment.


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How COVID-19 Has Affected the Canadian CRE Market | Canadian Real Estate News

As you may have already read, the novel coronavirus has left an impact on industries around the globe with the Canadian real estate market being no exception. 

These unprecedented developments have left several CRE investors pondering on the future of the market. 

While the situation is very severe from a health stance, Canadian retail CRE investors are actually in a good place and would benefit from investing in commercial real estate during COVID-19. Here’s why!


Canada and COVID-19

The number of confirmed cases with COVID-19 are on the rise and this has sent some into a state of panic. Many fear that the worst is yet to come, and governments, healthcare officials, and businesses are doing all they can to stop the epidemic from spreading. 

That means closing restaurants, schools, gyms, museums, and shopping malls around Canada. Many private and public institutions have officially shut down to flatten the curve and remain compliant with social distancing norms.


Industries Thriving in the Pandemic 

While clothing retailers, restaurants, and coffee shops cannot help but to close their doors for the duration of COVID-19, Canadian CRE investors don’t actually have any cause for anxiety. Many commercial retail spaces are open to serve people who are in lockdown. 

Grocery stores, pharmacies, medical supply shops, and medical offices are naturally getting more foot traffic, and this will go on for the duration of COVID-19. 

They provide essential products and services, and even if a complete lockdown is ordered, as we’ve seen in countries such as Italy and Spain, and in various cities in both China and the U.S., these retail locations have remained operational. 


The Future Is Hopeful 

Regardless of the current situation, the future is bright for retail CRE. Those who invest in retail real estate now stand to benefit financially. At the moment, the costs of buying CRE are lower, and once the pandemic is put under control, retailers will jump at the opportunity to rent out spaces, open up shops, and regain financial stability just like what’s happening in China as many retailers start to reopen

It’s expected that shopping at brick-and-mortar locations across Canada will improve to pre-Corona levels; especially restaurants, entertainment venues, gyms and discount retailers. 



Investing in Canadian retail CRE could offer a big return on investment once the pandemic threat has passed. There are already reports analyzing “retail recovery following containment of COVID-19” as China has initiated its reopening. This confirms that while many around the world are currently experiencing restrictions, it will not last forever, and the future appears to be bright for those wise enough to make strategic investments now. 

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