Commercial medical & legal office building - share utilities

[Jay Dimacali]

Hi BP. I'm looking at a medical & legal office building for a commercial purchase. A value add I can see is to have the tenants pay for the utilities which would be a great increase in income and almost creating a NNN lease. Since I'm more of a residential guy and this is my first look at commercial, I'm not familiar with all the nuances of the commercial realm. If it helps, the building is located in CA in the So Cal area. Anyone have any thoughts and experience with having a tenant take over their utilities? Will they be upset and leave? Or will they accept it and stay? (I'm planning on having the current rent stay the same.)

[William Thresh]

Is their lease ending soon? so you will give them a renewal option with those terms? See what spaces in the area are doing. You may be better off just raising the rent and continuing to pay for utilities. Small tenants prefer to have a gross lease, less work for them even if they are technically paying more.