In the real estate investment industry, Base Rent refers to the minimum amount of rent that is due under a lease agreement, not including any additional charges or costs that could be incurred. These additional charges might include operating expenses, property taxes, insurance, maintenance costs, and utilities, depending on the type of lease agreement.
In a net lease structure, for instance, the tenant would pay the base rent plus some or all of these additional costs. The specific type of net lease (e.g., single net, double net, triple net) determines which costs are the tenant’s responsibility beyond the base rent.
In contrast, a gross lease typically includes these additional costs in the rent amount, meaning the tenant only pays a single lump sum, and the landlord is responsible for any additional costs. In this case, the ‘base rent’ is somewhat of a misnomer because there’s only one all-inclusive rent payment.
In commercial leases, base rent is typically calculated on a per square foot per year basis, and it forms the primary source of return on investment for the real estate investor or landlord.