Hidden Costs in Commercial Leases — and How to Catch Them Early
By Chris Rohrer, Broker & Pete Kostroski, Broker | Rokos Advisors
When most tenants evaluate a new lease, the first thing they compare is base rent. But in commercial real estate, the true cost of occupancy goes far beyond what’s printed on page one. Operating expenses, future escalations, maintenance clauses, and tenant improvement responsibilities can quietly add up — and if they’re not fully understood, they can impact your budget for years.
The difference between a good lease and a bad one isn’t always the rent. It’s the details.
The Costs That Don’t Show Up in the Headline Rent
Many leases look attractive at first glance — competitive rental rates, generous concessions, or landlord-funded improvements. But beneath those numbers often sit additional expenses that shift risk and cost back to the tenant.
Common hidden costs include real estate taxes, operating expenses, property management fees, and utilities that may not be fully explained in early proposals. Some landlords structure leases so base rent appears lower, while escalating pass-through expenses carry more of the financial burden over time.
Tenants also need to pay attention to how operating expenses are calculated. Are they based on a base year? Do they have caps? Are there exclusions for capital improvements? These details determine how unpredictable your occupancy costs may become five, seven, or ten years into your lease.
CAM, OpEx, and Escalations: The Silent Budget Drains
Common Area Maintenance (CAM) and operating expenses vary widely by building and landlord. Some leases pass through nearly every building-related cost — including administrative fees, capital repairs, or roof replacements.
Then there are escalation clauses. Annual rent increases may be predictable, but operating expenses can escalate at a much higher rate depending on market conditions, property upgrades, or tax increases. Without clear caps or definitions, tenants can find themselves paying far more than they initially budgeted.
The key is not avoiding these costs — it’s understanding and negotiating how they are structured before signing.
Maintenance and Repair Responsibilities
Another major area where tenants get caught off guard is maintenance responsibility. Some leases shift HVAC maintenance, roof responsibilities, or structural elements onto the tenant, especially in industrial and flex properties.
At face value, this might not sound costly — until a major system fails.
Without clarity on who maintains and replaces key building components, tenants can face unexpected capital expenditures mid-lease. These aren’t just repair bills; they’re business disruptions.
The True Cost of Build-Outs and Improvements
Tenant improvements are often presented as a benefit — but they come with fine print.
A landlord may offer a generous improvement allowance, but restrict how and when it can be used. Some improvements become the landlord’s property at lease end. Others require the tenant to restore the space to its original condition.
Demolition, restoration, and code compliance at move-out can create significant end-of-lease costs if they weren’t planned for from the beginning.
How to Catch These Costs Early
Most of these risks aren’t hidden — they’re just buried. And catching them early is where strong tenant representation makes the biggest impact.
Tenants should start by asking:
How are operating expenses calculated and capped?
What costs are excluded from CAM or pass-throughs?
Who maintains major building systems over the term?
What happens to improvements at lease expiration?
What is my total cost of occupancy over the full lease, not just year one?
Having transparency into these details allows tenants to compare options accurately — and negotiate terms that support long-term business stability.
A commercial lease isn’t just a location decision. It’s a long-term financial commitment that touches every part of your business. Hidden costs don’t stay hidden forever — they show up later, when you have less leverage and fewer options.
Want to understand the true cost of your next lease? Connect with Rokos Advisors today—Let’s start with the details early.
Rokos Advisors is an award-winning Minneapolis - St. Paul based commercial real estate/tenant representation firm specializing in helping businesses find the perfect office or industrial space for their company.