NNN or gross? Who pays CAM? What’s a fair TI allowance? A commercial lease is a long, expensive contract, and the quoted rent is only the beginning of the real number. This guide decodes the terms — for tenants and landlords — with the Austin-specific angles that matter.
A commercial lease is not a residential lease with bigger numbers. It is a negotiated, multi-year contract in which almost every cost, obligation and escape hatch is on the table. Whether you are a tenant signing your first space or an owner drafting terms, the vocabulary below is where the money lives.
The first question on any deal is who pays the operating expenses. Under a triple-net (NNN) lease, the tenant pays a base rent plus its pro-rata share of the three “nets” — property taxes, building insurance and common-area maintenance — which means the quoted base rent understates the true occupancy cost, sometimes substantially. Under a full-service (gross) lease, the landlord pays those expenses out of a higher, all-in base rent, giving the tenant a predictable number. A modified gross lease splits the difference — for example, the landlord covers taxes and insurance while the tenant pays its own utilities and janitorial. Retail and industrial deals in Austin are frequently NNN; multi-tenant office is often full-service or modified gross. Always ask what structure a quoted rate assumes before you compare two spaces.
Common-area maintenance (CAM) covers the shared costs of running a property — landscaping, parking-lot upkeep, common-area utilities, security, management fees. In a NNN deal the tenant reimburses CAM, so read the CAM clause closely: is management capped? Are capital expenditures passed through, or only routine maintenance? Is there an annual cap on CAM increases? A tenant should push for an expense cap on controllable costs and the right to audit the landlord’s reconciliation. A landlord, in turn, wants clear language on what is reimbursable so it is not absorbing rising costs mid-term.
Few tenants take space exactly as-is. The tenant improvement (TI) allowance is the landlord’s contribution to the build-out, quoted in dollars per square foot. It is one of the most negotiable terms in the lease and scales with term length and tenant credit: a strong tenant signing ten years earns a far larger allowance than a startup signing three. Costs above the allowance are the tenant’s, so scope the build-out before signing. Free rent (an abatement of the first few months) is a parallel concession, common in softer submarkets — and Austin’s office market, with its elevated vacancy, has been a market where tenants can win meaningful concessions on both TI and free rent.
The term sets the commitment; small retail and office deals commonly run 3 to 5 years, while larger office and industrial deals run 5 to 10 years or more. Watch the rent escalations — annual bumps of a fixed percentage or a set dollar amount compound over a long term and materially change total cost. Negotiate options: a renewal option protects a tenant’s location and a landlord’s occupancy; an early-termination or contraction right buys flexibility; a right of first refusal on adjacent space protects room to grow. Each option has a price, and each is a lever.
Beyond the economics, read for the clauses that bite later: the use clause (what you are permitted to do in the space) and any exclusivity protecting a retailer from competitors in the same center; assignment and subletting rights, which determine whether you can offload space if plans change; maintenance and repair responsibility, especially for the roof, structure and HVAC; personal guaranties, which put the signer’s own assets at risk; holdover penalties; and default and cure provisions. No one should sign a commercial lease without a commercial broker representing their side and, for anything material, a real-estate attorney.
Two local realities shape Austin leases. First, property taxes are high and reassessed annually by the county appraisal districts, and in a NNN deal those increases flow straight to the tenant — so a tenant should understand how tax growth is passed through and whether it is capped. Second, the office market’s elevated vacancy (documented by CBRE, JLL and Cushman & Wakefield) has shifted negotiating leverage toward tenants in many submarkets, making this a market to press for concessions. On the industrial and prime-retail side, by contrast, low vacancy keeps landlords firmer. Know which side of that line your space sits on — the submarket map and asset-class guide will tell you — before you negotiate.
Editorial note: rent, cap-rate and vacancy figures on this page are ranges drawn from published market commentary by CBRE, JLL, Cushman & Wakefield, Colliers and CoStar, plus public data from the City of Austin, the U.S. Census Bureau and the Travis, Williamson and Hays appraisal districts. Markets move every quarter — always confirm current figures against the latest brokerage report or a licensed local broker before acting.