When looking for office space to lease, tenants should not overlook the cost variation charged for their electric consumption. There are three basic ways landlords measure usage and bill tenants in multi-tenanted office buildings:
- Tenant Electric – charge quoted as a fixed dollar amount per square foot on an annual basis
- Direct Meter – tenant pays the utility company directly for their actual usage
- Submeter – measures the electric usage to the tenant’s suite within the building
In New Jersey, electric expense for office tenants is typically between $1.50-$3.50 per square foot. The actual cost for usage can vary between neighboring buildings in the same market depending on their age and efficiency. This variation in charges affects a company’s annual occupancy costs. This difference is clearly illustrated when a financial analysis comparing various properties and the expenses associated is performed. This is an important factor to consider when examining the overall costs to renew or relocate your office space. Tenants can request a separate meter or a sub meter be installed at the landlord’s expense during the negotiating phase of the office lease.
The tenant electric charge discussed above covers usage within the tenant’s individual space. The only other charge a tenant may be required to pay is the electric used to operate the common areas of the building which may include heating, air conditioning and lighting. This electric expense for office tenants is typically incorporated into the operating expenses of the building and tenants would only be responsible if the cost of electric for the common areas is greater than the initial year of the lease. This increase in subsequent years is “passed through” to tenants.