Understanding Your Utility Charges

22 January, 2018 / Alan Rosinsky
Office worker trying to understand utility charges in Manhattan


Got the rent covered? Excellent. Now factor in the additional expenses for which you may be responsible if you lease Manhattan office space. Above and beyond the base rent, Manhattan commercial tenants are expected to shoulder the cost of electricity as well as a few other utility charges and operating expenses. Here’s the basic breakdown:

Heat & Electricity for Manhattan Commercial Tenants

The good news is that the cost of heat is always included in the base rent if you are a Manhattan commercial tenant. Electricity, on the other hand, is always billed separately. You’ll get hit with the bill in one of three ways:

1-     Directly from Con Edison (direct meter)

2-     From the landlord who monitors tenants’ electricity usage (sub-metered)

3-     Billed on a per-square-foot basis and tacked onto the base rent each month (rent inclusion). Note that the charge for electricity on a rent inclusion basis typically ranges from $3.00-$4.50 per square foot.

Extras That Aren’t Always Extra

Utility expenses and other miscellaneous charges for tenants, which can include everything from water to cleaning services, vary among Class A, B and C buildings. Here is an overview of how buildings are classified and, subsequently, which buildings offer what amenities and for how much.

Class A: The Rolls Royce of the commercial real estate in New York. Class A buildings have a lot going for them inside and out, including high-quality construction and infrastructure, safe and highly visible locations, and professional management. Naturally, Class A buildings command the highest rents. If you are Manhattan commercial tenant considering leasing in a Class A building, you will be glad to know that the cost of water, sprinklers and guard services is always included in the base rent. As a bonus, cleaning services and rubbish removal are usually included in Class A buildings for no additional charge.

Class B: Not quite as swanky as Class A properties, Class B buildings are still typically nicely maintained and well-appointed. The rent won’t give you quite the sticker shock that a Class A rent might, but landlords of Class B buildings often charge tenants an extra nominal fee for water, sprinklers, guard services, cleaning services and rubbish removal.

Class C: Class C buildings are generally home to entry-level commercial space (because everybody starts somewhere). These are older buildings (older than 20 years) and are generally located on side streets. They usually are not the prettiest structures and often feature few elevators, no central air, and few meticulously maintained common areas such as lobbies, bathrooms, and corridors. The standard rent rates are the most affordable, but landlords do charge for water and sprinklers and often forgo frills like guard services and cleaning services.

A Word of Advice

Make sure that your broker spells out all additional monthly charges entailed with renting a particular space. A broker dedicated to helping you find the right space for your business will take the time to help you understand the full cost of renting a commercial space so that you can budget accordingly.

Thinking of becoming a Manhattan commercial tenant? Contact Metro Manhattan Office Space Principal Broker Alan Rosinsky at 212-444-2241.

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