Industrial tenants in Ontario and Alberta frequently receive multiple competing lease proposals and select the wrong option because they compare headline net rents rather than total occupancy cost. This guide explains how to compare industrial lease proposals correctly.
Net Rent Is Not the Full Picture
Industrial leases in Ontario and Alberta are almost universally net — you pay base rent plus additional rent (operating costs). Additional rent typically includes property taxes, building insurance, roof and structure maintenance, and property management fees. In the current market, additional rent on GTA industrial properties runs $4.50–$8.00/SF depending on building age and landlord management structure. Two buildings with identical net rents can have materially different total occupancy costs.
Calculate Total Occupancy Cost
The correct comparison metric is total occupancy cost: net rent plus additional rent plus utilities plus fit-out cost amortised over the lease term. For a 50,000 SF building at $18/SF net plus $6/SF additional, your base commitment is $24/SF before utilities. A competing option at $20/SF net with $4/SF additional is a worse deal despite a lower net rent.
Evaluate the TI Package
Tenant improvement allowance directly offsets your fit-out cost. A $25/SF TI on a 50,000 SF building is $1.25M — meaningful capital that affects your effective rent. Calculate effective net rent: (total rent paid over term minus TI received) divided by total square footage and lease months.
Assess the Options Structure
Options to renew and options to expand protect your operational flexibility. An option to renew at fair market rent is standard but weak — you can always negotiate a new lease. An option to renew at a fixed or capped rent is valuable. An option to expand into adjacent space is often worth more than a lower initial rent.
Confirm the Specifications Match Your Use
A building that technically fits your square footage requirement but has inadequate clear height, insufficient power, no dock loading or a yard too small for your trucks is not a viable option at any rent. Confirm fit before you invest time in lease negotiation.
What Lucero Does
Lucero models total occupancy cost across competing proposals on every tenant mandate — not just headline net rent. The right option is the one with the best risk-adjusted economics for your business, not the lowest number in the first row of the proposal.