Leasing commercial space in Alberta is a sequence of decisions, most of which are made long before a lease is drafted. This guide sets out that sequence end to end — how space is priced and marketed, how tenants are qualified, how the main lease structures differ, and what due diligence each side owes the other — for landlords and tenants working in Calgary, Edmonton and Lethbridge.
The three lease structures, and what they actually mean
Almost every commercial lease in Alberta is a variation on one of three structures. The labels get used loosely, so confirm the substance rather than the name.
- Triple net (NNN). The tenant pays net rent plus a proportionate share of operating costs, property tax and insurance. This is the dominant structure for industrial, retail and most office. The landlord’s return is the net rent; the building’s running costs flow through.
- Gross or full service. One rent covers everything. Common for smaller office suites and short terms. The landlord absorbs cost variability, and prices for it. Often modified: a “base year” gross lease passes through increases above a stated year’s operating costs.
- Ground lease. The tenant leases land and builds on it, usually for a long term. A different animal entirely, with its own financing and reversion issues.
The practical question for a tenant is not which label applies but what the total annual occupancy cost per square foot will be, and how much of it can move.
Pricing space: what the market actually pays
Asking rent is a landlord’s opening position. Achieved rent — what deals are actually closing at, net of inducements — is the real number, and it is not published.
A defensible pricing position comes from three inputs:
- Comparable transactions. Recent deals in the same submarket, same asset class, similar size and quality. A brokerage with active deal flow has this; a public listing site does not.
- Competing supply. What else a prospective tenant will tour, and what those landlords are offering. Vacancy in the immediate competitive set matters far more than a city-wide average.
- The building’s own position. Age, clear height and loading for industrial; parking ratio, HVAC and elevator service for office; co-tenancy, exposure and traffic for retail.
For market context, the quarterly reports published by CBRE, Colliers and Cushman & Wakefield cover Calgary and Edmonton by asset class and are freely available. Read them as trend indicators, not as pricing for a specific building.
Preparing space before it goes to market
Vacant commercial space is expensive. Every month it sits, the landlord carries taxes, insurance, utilities and management with no offsetting revenue — and the space typically shows worse, not better, over time.
What consistently shortens time on market:
- A demised, clean, well-lit shell. Tenants struggle to imagine their business in a space full of the last tenant’s fixtures. Removing them is usually cheaper than the vacancy it saves.
- A decided improvement position. Knowing in advance what allowance or turnkey scope the landlord will fund, and being able to state it, converts tours into offers.
- Accurate measurement. Rentable area measured to a recognised standard, recently, with the plan available. Disputes over area discovered mid-negotiation stall deals.
- Documentation ready. Operating cost history, site plan, zoning confirmation, building systems summary. A tenant’s advisor will ask for all of it.
Marketing that reaches actual decision-makers
Commercial tenants are found through a narrow set of channels, and the mix differs by asset class. Industrial and large-format retail requirements come largely through brokerage networks. Small-bay industrial and neighbourhood retail respond to signage and local search. Office requirements increasingly start online but close through representation.
Practical points: signage on the building still generates a meaningful share of small-space enquiries; listing on the recognised commercial platforms matters because that is where tenant representatives search; and a clear, honest listing — real dimensions, real photographs, stated asking rent and additional rent — filters out enquiries that were never going to transact.
Qualifying a tenant properly
The cost of the wrong tenant is not the lost rent. It is the lost rent, plus the unrecovered improvement allowance, plus the commission, plus the legal cost of recovering possession, plus a second vacancy period.
A reasonable qualification package for a commercial tenant includes financial statements or a notice-to-reader for the operating entity, a business plan or description of operations for a new venture, references from previous landlords, personal net worth information where an indemnity is being sought, and confirmation the proposed use is permitted under the applicable land use bylaw.
Landlords are entitled to ask for this. Tenants who provide it early get better terms, because they are pricing as a lower risk.
From offer to lease
The sequence is usually: proposal or term sheet, offer to lease, due diligence and conditions, formal lease, possession.
The offer to lease is the pivot point. In Alberta it is commonly binding on its business terms, with the formal lease to follow. Everything material should be in it: rent and escalations, additional rent treatment, term and options, improvement allowance and scope, deposit and security, conditions, and the fixturing period.
Conditions protect the tenant while it verifies the space will work — zoning and permitted use, development and building permits for the intended fit-out, financing, board or franchisor approval, and satisfactory review of the landlord’s form of lease. Conditions should have dates, not “reasonable time”.
The fixturing period is rent-free time before the term commences, for construction and installation. Distinguish it from free rent as an inducement; they serve different purposes and are often conflated.
Due diligence a tenant should not skip
- Permitted use and zoning. Confirm with the municipality that the intended use is permitted, not merely discretionary. A discretionary use can be refused.
- Building permit feasibility. Confirm the fit-out can be permitted and built in the time allowed. Change of occupancy classification can trigger expensive code upgrades.
- Servicing and capacity. Power, gas, water and drainage adequate for the intended operation — a real constraint for food service, light manufacturing and anything with refrigeration.
- Exclusivity and restrictive covenants. In multi-tenant retail, another tenant’s exclusivity may prohibit your use entirely.
- Parking. Confirm the allocation in the lease, not the parking lot.
- Environmental condition. For industrial space with a prior industrial use, understand what the tenant is accepting and what it will be responsible for at the end of the term.
Due diligence a landlord should not skip
Confirm the tenant entity’s legal name and standing, that the signatory has authority to bind it, that the covenant supports the improvement investment being made, and that the proposed use does not conflict with an existing tenant’s rights or with the building’s insurance. Confirm insurance certificates naming the landlord before possession, not after.
After possession: the part most people ignore
A commercial lease is a decade-long relationship and it needs administration. Rent escalations take effect on schedule. Operating costs are reconciled annually, and the reconciliation should be checked. Renewal and termination options have notice deadlines that, once missed, are gone — a tenant who forgets to exercise a renewal option loses it, and a landlord who fails to respond within a stated window may be deemed to have consented to an assignment.
Both sides should diarise every dated obligation in the lease at the moment it is signed.
Where a brokerage earns its fee
On the landlord side: accurate pricing, real market intelligence, a shortened vacancy period, and a qualified tenant whose covenant supports the deal. On the tenant side: access to space that is not publicly marketed, comparable evidence to negotiate against, and an advisor who has read several hundred of these documents and knows which clauses are standard and which are the landlord’s opening position.
Commercial lease terms are not legal advice, and nothing in this guide is. Both sides should have a commercial real estate lawyer review the lease before signing.
Talk it through with Rimrock
Rimrock Sales & Leasing acts for commercial landlords and tenants across Calgary, Edmonton and Lethbridge — office, industrial, retail and mixed-use. Whether you are marketing a vacancy or looking for space, we can give you a straight read on what the market is actually paying.
Get in touch or call 403-910-4611.