Operating Costs in Industrial Leases — The Tenant Protections Worth Negotiating

The size of the exposure

Net asking rents averaged about $19.10 per sq. ft. across the Q2 2026 brokerage reports, and above $20 in Richmond, Vancouver and the North Shore. Operating costs add roughly $6 to $7 per sq. ft. on top. On a 20,000 sq. ft. facility, the gap between a well-drafted and a poorly drafted cost provision can be $80,000 a year.

Almost every Metro Vancouver industrial lease is triple-net. Tenants carry property taxes, insurance and common area maintenance in proportion to their area. Check how that proportion is calculated: rentable area with load factors and usable area give different answers.

Capital costs are the biggest risk

A $600,000 roof on a 50,000 sq. ft. Burnaby building, passed through in a single year, hands a 15,000 sq. ft. tenant a $180,000 bill. Market practice now amortizes capital items over their useful life, typically 10 to 25 years, with only the annual portion recoverable. Push for a reasonable interest rate on the amortization, often the landlord's actual financing cost or something like prime plus 2%, and exclude upgrades that mainly serve the landlord's future leasing or property value.

Base rent sets where your occupancy cost starts. The operating cost clause sets where it ends up.

Five protections to ask for

• Caps of 3% to 5% on year-over-year increases in controllable costs such as management, landscaping and general maintenance. Taxes and insurance stay outside the cap; budget for 8% to 12% annual tax increases.
• Gross-up language that calculates costs as if the building were 90% to 100% occupied, which matters in Campbell Heights and Port Kells projects still leasing up.
• Audit rights: access to invoices, a 12- to 24-month window, an independent auditor, and landlord-paid audit costs when overcharges exceed 3% to 5%.
• A management fee cap in the 3% to 5% of gross revenue range, with administrative charges either inside it or explicitly limited.
• Explicit exclusions: initial construction, leasing commissions, financing costs, depreciation, insured losses, landlord penalties.

What to do before signing

Ask for three years of historical operating cost statements. A well-run Metro Vancouver industrial building operates at $3.50 to $5.50 per sq. ft. before taxes, with taxes adding $2 to $4 depending on municipality. Anything outside that range deserves a question, and the trend tells you how the landlord treats capital recovery.