The Commercial Lease Encircling Real Estate Business

Home Real Estate Concepts The Commercial Lease Encircling Real Estate Business

The real estate business has never remained the same throughout history with the exception of changes occurring in every phase and generation. As the developing pockets of the world bloom with new establishments, communities, residences and offices, raising a question about the commercial lease in real estate and their grip in developing the sector.

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The Past and Present

Commercial real estate markets depend on businesses and enterprises to set up hubs around developing centres to provide the shelter and means to conduct business with minimal disturbance.

  • A commercial real estate is leased out to provide a workspace and not a living space. Making it one of the three main types of real estate alongside residential and industrial.
  • Commercial leases for real estate businesses can include full-service leases, net leases, and the more common modified gross leases.
  • It’s been estimated the largest surge of commercial real estate markets has been seen particularly in the MENA region along with high GDP Asian countries. Regions like the Middle East, South East Asia and Western metropolises have the highest demand for storage and warehouses.      
  • The development of the real estate sector is in some ways tied to the development of logistics and ports in regions that allow for such high scale capabilities.

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Factors and Drivers

  • Demographics
    • With a rising trend of millennials entering the workforce, startups and crowdfunded projects have taken shape that demand more sophisticated working spaces.
  • Urbanization
    • Buildings as far as the eye can see with tall skyscrapers and compact homes are becoming the norm in most places.
    • Cities are a better choice for companies to attract well-qualified workers.
  • Office Sizes
    • Office sizes have been dropping to make way for more social work settings.
    • Property managers and landlords are thus focusing on finding companies more interested in spaces with less volume but more utility.
  • Interest Rate Increases
    • Although interest rates vary all over the world, the onset and fear of the unexpected, are getting investors riled to purchase properties before capitals rise.
    • Likewise, buyers and companies are extending contract leases on commercial setups for a larger number of years due to the difficulty in finding ample workstations.
  • International Investments
    • World globalization has opened the doors for MNCs to set up business hubs in other countries.
    • Some places have thus become preferred places for capital investments like the Middle East and Asia, while others are struggling to keep up with the demand and pace.
  • Improved Development Processes
    • With BIM and new 3D technologies being supported by AR/VR, businesses can now see what their spaces will look like.

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Emerging Trends

While it can be well attested that the growth of the real estate sector hasn’t exactly been uniform in every single part of the world, those that have seen the golden opportunities to attract foreign investments are the ones raking in the profits today.

  • An increasing number of countries, like the North American and European markets, are adopting transparent laws that protect the buyers and tenants by rejuvenating figures by 6%.
  • Political issues such as the imposition of tariffs and sanctions have undoubtedly affected investments and even blocked out prospects for REITs. Especially in a long-winded burst from the US since 2016.
  • Commercial leases are becoming more flexible to allow companies to own the property after a few years by simply paying a little extra rent each month. Rent to own schemes is a whole new world of economics that developers must understand fully.
  • Real estate in deprived regions may be affected by stunted rates of new buyers, but when there are companies, there’s always an opportunity to build and provide. Even deprived places in Africa such as Kenya and Nairobi are adopting liberalized plans to snag foreign investments.
  • Companies like Amazon, Alibaba and their local counterparts all operate on a drop shipping scheme that requires well-established warehouses in almost every corner of the globe. This has contributed majorly to the development of the commercial real estate.
  • Commercial leases feel less like leases for companies contributing to the development of special economic zones and trade free zones even in taxable nations. Such agreements can be afforded by the largest of conglomerates.

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How Commercial Leases Have Changed

  • Leases now allow certain rights to tenants and companies to forfeit and reprieve the setup, should there be a violation of the standard of the utilities as attested by the landlord.
  • Special VATs have been added to commercial leases for export and import duties in some nations with the prospect of regulating exchanges and keeping them in check.
  • Brokerages and agents for commercial properties are being replaced by special departments set up by the government. Especially in Middle Eastern countries, to keep a close watch on companies competing for space.
  • Real estate has seen many ups and downs from the possible use of virtual currencies that establish to remove the need for any bureaucratic procedures which has produced mixed reviews from the market.
  • Consumer forums and environmental groups have even added certain regulation on the use of resources and items that may seem harmful and detrimental.
  • Certain legislations now require additional leases for carbon emissions and other effluent emissions from manufacturing companies.

Commercial real estate is a promising and growing trend worldwide, giving businesses an opportunity to occupy space without the hassles of buying. From an investors point of view, investing in commercial real estate deems to be extremely lucrative. Not only making a profit from selling the property but also generating a larger sum via rent from the tenants.

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