If you’re exploring Calgary commercial real estate, one of the most frequently asked questions you’ll encounter is: “What is the typical length of a commercial lease?” Whether you’re leasing office space, retail storefronts, or industrial property, understanding lease terms is essential to planning your long-term business operations.
Typical Commercial Lease Lengths in Calgary
In Calgary, most commercial leases fall within the 5-to-10-year range. This is considered the standard for a number of reasons:
- Stability for landlords: Longer terms help landlords recover the cost of tenant improvements and reduce vacancy risk.
- Security for tenants: A fixed lease term ensures predictable rental costs and long-term location stability.
- Financing: Lenders often prefer longer leases when financing a property, especially in Calgary commercial retail developments.
However, lease terms can vary based on the size of the space, the type of property, and the tenant’s negotiating power. Three-year lease terms are also common, particularly for smaller units or in a tenant-favorable market where flexibility is prioritized.
When Does the Lease Start?
A key aspect of commercial leasing in Calgary is the lease commencement date. Typically, this date is defined in the lease agreement and can fall into one of two categories:
- Fixed Start Date: The lease begins on a specific date regardless of whether the tenant has moved in.
- Commencement Upon Possession: The lease starts once the tenant receives possession of the space, which may be after construction or improvements are completed.
Understanding your lease start date is vital, especially when coordinating move-ins, renovations, or the start of business operations.
What Happens If the Space Isn’t Ready?
Sometimes the landlord is still completing tenant improvements when the lease is set to begin. To address this, most commercial lease agreements in Calgary will include:
- A Fixturing Period: This is a rent-free window allowing tenants to prepare the space before opening.
- Delayed Rent Commencement: Rent starts only after possession is delivered.
- Tenant Improvement Timelines: Agreements often include construction timelines to ensure possession is delivered on time.
Always review these clauses with your broker or legal advisor before signing a lease.
Renewal Options and Extensions
A standard commercial lease may also include one or more renewal options. These give the tenant the right to extend the lease after the initial term, often at a pre-negotiated rate or based on fair market rent.
It’s important to note that renewal options are not automatic—they must be negotiated in advance and explicitly included in the lease agreement.
Renewal clauses are especially valuable in Calgary’s competitive retail and office sectors, where securing long-term space can be challenging due to low vacancy in prime locations.
Understanding Calgary’s Vacancy Rates
Vacancy rates in Calgary commercial real estate vary by property type and location. While downtown office vacancies remain higher than average, prime retail and suburban office spaces continue to be highly competitive, with lower vacancy and strong tenant demand.
This variability means that lease lengths, incentives, and negotiating leverage can differ significantly depending on the area and asset class.
Final Thoughts
When considering commercial leasing in Calgary, it’s essential to understand not just the length of the lease but also the terms that surround it — from commencement dates to improvement periods and renewal rights. The standard lease length is typically 5 to 10 years, though 3-year terms are not uncommon for smaller spaces or in more flexible and competitive market conditions.
Each agreement should be tailored to your operational needs and future growth plans.
Working with a knowledgeable Calgary commercial real estate broker can ensure you negotiate favorable terms and avoid costly surprises.
Need help understanding lease terms or exploring commercial retail opportunities in Calgary? Contact our team at Leaseco Realty for expert guidance tailored to your business.