How to Compare Industrial Lease Proposals

Industrial lease proposals rarely use the same format. Different lease lengths, rent increases, incentives, expenses, building work, and timing can make a simple rent comparison misleading.

A fair comparison does not choose a proposal automatically. It puts both proposals on the same basis, shows unsupported assumptions, and lists the questions that advisers still need to answer.

Short answer

To compare industrial lease proposals:

1. Confirm both buildings support the same operating needs.
2. Put the costs in the same format.
3. Calculate recurring costs for each lease year.
4. List one-time costs and credits separately.
5. Add location cost changes the same way.
6. Show different lease lengths clearly.
7. Keep practical fit separate from the dollar comparison.
8. List exclusions, conditions, and open questions.

The result should be easy to follow, not a black-box score.

Put both proposals on the same basis

Before calculating, ask whether the two proposals are alternatives for the same requirement. A mathematical comparison is not useful when one option cannot support the operation or schedule.

Confirm:

• Building size and usable configuration.
• Required occupancy date.
• Physical and utility fit.
• Permitted use and operating conditions.
• Required landlord and tenant work.
• Expansion, renewal, and exit needs.
• Internal approval assumptions.

If one proposal depends on unresolved capacity, permitting, utility, schedule, or work-scope questions, keep those conditions visible beside the economics.

Compare the same ongoing costs

Use the same units and scope for each proposal.

Recurring fields may include:

• Initial base rent per square foot per year.
• Base-rent escalation timing and percentage.
• Operating expenses per square foot per year.
• Assumed operating-expense growth.
• Other recurring occupancy charges included in the screen.
• Annual labor, freight, utility, tax, or other cost changes relative to the current operation.

Do not include an item for one proposal and silently exclude it from the other. If a field cannot be supported, label it as unresolved rather than substituting an unmarked guess.

Free rent does not mean free occupancy

A free-rent period may apply only to base rent. Operating expenses, utilities, insurance, maintenance, security, or other obligations may continue.

Record:

• Number of free base-rent months.
• When the period occurs.
• Conditions that can reduce or recapture the concession.
• Whether other charges remain payable.

The proposal comparison scorecard assumes consecutive free base-rent months beginning in the first lease month. Expenses and other location costs continue. It does not interpret lease language or determine whether a concession is collectible. If a proposal uses a different free-rent schedule, the tool is not an exact model of that proposal.

List one-time costs and credits separately

One-time economics should remain visible rather than being buried in an effective rate.

Possible tenant costs include:

• Fit-out beyond funded landlord work.
• Moving and equipment relocation.
• Overlap and dual operations.
• Downtime and commissioning.
• Technology, security, racking, furniture, and process installation.
• Restoration and exit obligations.
• Professional and diligence costs selected for the comparison.

Possible credits include:

• Tenant-improvement allowances.
• Moving allowances.
• Other stated landlord contributions or incentives.

Test the timing, conditions, documentation, and reimbursement mechanics separately. A stated credit is not automatically equal to cash available when needed.

Compare different lease lengths carefully

Total cost is not directly comparable when lease terms differ. First, compare both proposals over the shorter lease term. Use the same cost categories and timing rules, then show the total and average yearly cost for each proposal.

Keep each proposal's full stated-term total and annual average as secondary context. Those figures describe different durations and should not be treated as equivalent.

Common-horizon and stated-term figures still have limits:

• It does not equal a discounted cash-flow analysis.
• It does not remove renewal or residual exposure.
• It does not equalize flexibility.
• It does not account for different timing of costs and credits.
• It does not resolve option, guarantee, deposit, or termination differences.

Show the same-period comparison and the full lease totals together. A yearly average helps with comparison, but it does not make different lease terms equal.

Show operating-cost differences clearly

A location can change costs outside the lease. If those changes are included, compare both proposals with the same current operation and the same cost categories.

Potential categories include:

• Labor access and compensation assumptions.
• Freight distance and route assumptions.
• Utility demand and rate assumptions.
• Taxes and jurisdictional costs.
• Maintenance, security, snow, landscaping, or site operations.
• Productivity or service-level effects supported by the operating team.

Use signed deltas consistently. Positive values increase modeled cost. Negative values reduce modeled cost. Do not use a cost delta to hide an unresolved operational constraint.

Use the industrial total occupancy cost framework to decide which labor, utility, freight, tax, transition, and operating effects belong in the wider scenario rather than the lease-only comparison.

Keep practical fit separate from cost

Some questions are important but should not be monetized without evidence. Track them separately.

A simple practical-fit review can cover:

• Capacity fit.
• Labor and access confidence.
• Timeline fit.
• Expansion flexibility.

Use fixed statuses such as meets, uncertain, does not meet, and not assessed. Do not convert those statuses into arbitrary weights or present them as precise economics.

A proposal with a lower yearly cost and more practical-fit concerns is not automatically better or worse. Decide what evidence is needed before advancing it.

Compare flexibility and risk terms

Economic normalization does not resolve lease structure. Review deal-specific provisions with qualified advisers.

Questions may include:

• Renewal and expansion options.
• Contraction, assignment, sublease, and transfer flexibility.
• Guarantees, deposits, security, and credit support.
• Repair, maintenance, replacement, and compliance responsibilities.
• Casualty, condemnation, restoration, surrender, and holdover.
• Operating-expense definitions, exclusions, caps, and audit rights.
• Work-letter scope, delivery conditions, and remedies.
• Conditions, approvals, deadlines, and termination rights.

This guide does not interpret or recommend lease language.

Save the assumptions and results

For each proposal, preserve:

• Source date and proposal version.
• Included assumptions.
• Excluded categories.
• Unsupported inputs.
• Required diligence.
• Decision owner.
• Expiration or response deadline.
• Material changes from the prior version.

A consistent record helps prevent an outdated proposal or silent assumption from entering an approval package.

Common mistakes

Comparing starting rent only

Starting rent ignores rent increases, expenses, incentives, one-time costs, other operating costs, and lease length.

Mixing monthly and annual units

Convert every field explicitly. Do not rely on labels carried from different proposals.

Treating allowance as guaranteed cash

Confirm eligible work, timing, documentation, conditions, and unused-balance treatment.

Hiding term differences in one effective number

Show the full lease cost, average yearly cost, and lease length together.

Monetizing every operational question

Keep unsupported qualitative risks visible rather than assigning arbitrary dollar values.

Ignoring schedule

A favorable proposal is not useful if the building cannot be ready when the operation needs it.

A simple decision process

1. Validate operating fit.
2. Normalize recurring economics.
3. Separate one-time costs and credits.
4. Add supported operating cost changes.
5. Compare term and flexibility.
6. Record practical-fit problems.
7. Assign unresolved diligence.
8. Preserve a fallback path.
9. Obtain internal and professional review before commitment.

Use the industrial site selection checklist to test the broader operating and diligence path. Use the industrial operating-expense comparison guide to define the expense fields consistently.

Next step

Use the industrial lease proposal comparison scorecard for a quick comparison in your browser. If the assumptions need a tenant-side review, request an assumption review using non-confidential information only. Do not email proposals, leases, financial models, or other confidential documents unless a secure process is agreed in advance.