Difference Between A Commercial And Retail Lease In Queens
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When contemplating whether a lease is retail or commercial, the difference should be quite obvious – a retail lease would include shops and stores, while a commercial lease would be an office. Yet, this distinction is not as apparent as you might think.
Commercial real estate is used for businesses, while residential real estate is used for living. Compared to residential properties, commercial properties tend to be more stable and liquid because they are easier to sell.
A net lease agreement is typically structured so the tenant pays all the taxes, maintenance costs, insurance fees, utilities, etc. These obligations allow the net lease tenant to act as the property owner in many ways, without holding legal title.
Key Takeaway differences: A retail lease is used where there is a sale of goods or services, often in a shopping centre (cluster of 5 or more stores). A commercial lease is used for warehouse, industrial or office space premises.
Negotiating an early termination or changes to the lease Typically, a tenant that needs to terminate an NYC office lease will start with negotiations. Sometimes, this can be a good option if the tenant has a replacement tenant available, even if the lease prohibits assignment and/or subleasing.
A grocery store is typically considered to be both retail and commercial. It sells directly to consumers (retail) but often operates on a larger scale with bulk purchasing and distribution (commercial).
“Commercial space” generally refers to office space. With commercial space, there may not be as many people wandering in and out, whereas “retail space” depends largely on foot traffic. Commercial space is typically used for businesses that don't have a lot of foot traffic.
As the name suggests, a retail lease applies to those spaces or premises intended exclusively for retail, i.e. selling goods or services. For example, the premises used for a clothing store is leased out on a retail lease.
Cities have rules about how different areas can be used. Retail spaces typically are allowed in zones meant for shopping and mixed-use areas. Commercial spaces are more limited to location. For example, a factory would need to be in an industrial zone, while an office could be in a business district.
Since commercial and manufacturing properties are not designed to be lived in, these properties must be renovated to meet residential regulations. As a result, commercial-to-residential conversions in NYC are challenging but possible.
