Abatement: Often and commonly referred to as free rent or early occupancy and may occur outside or in addition to the primary term of the lease.
Above Building Standard: Upgraded finishes and specialized designs necessary to accommodate a tenant’s requirements.
Absorption: The amount of inventory or units of a specific commercial property type that become occupied during a specified time period (usually a year) in a given market, typically reported as the absorption rate.
Add-On Factor: Often referred to as the Loss Factor or Rentable/Usable (R/U) Factor, it represents the tenant’s pro-rata share of the Building Common Areas, such as lobbies, public corridors and restrooms. It is usually expressed as a percentage which can then be applied to the usable square footage to determine the rentable square footage upon which the tenant will pay rent.
Add-on factor = Rentable square feet = Usable square feet
Useable square feet
Allowance Over Building Shell: Most often used in a yet-to-be constructed property, the tenant has a blank canvas upon which to customize the interior finishes to their specifications. This arrangement caps the landlord’s expenditure at a fixed dollar amount over the negotiated price of the base building shell. This arrangement is most successful when both parties agree on a detailed definition of what construction is included and at what price.
Amortization: The repayment of loan principal through equal payments over a designated period of time consisting of both principal and interest.
Anchor Tenant: The major or prime tenant in a shopping center, building, etc.
Annual Percentage Rate (APR): The actual cost of borrowing money, expressed in the form of an annual interest rate. It may be higher than the note rate because it represents full disclosure of the interest rate, loan origination fees, loan discount points, and other credit costs paid to the lender.
Appraisal: An estimate of opinion and value based upon a factual analysis of a property by a qualified professional.
Appreciation: The increased value of an asset.
“As-Is” Condition: The acceptance by the tenant of the existing condition of the premises at the time the lease is consummated. This would include any physical defects.
Assessment: A fee imposed on property, usually to pay for public improvements such as water, sewers, streets, improvement districts, etc.
Base Rent: A set amount used as a minimum rent in a lease with provisions for increasing the rent over the term of the lease.
Base Year: Actual taxes and operating expenses for a specified base year, most often the year in which the lease commences.
Broker’s opinion of value/Broker’s price of opinion (BPO): An analysis provided by a real estate broker to assist a lender, buyer, or seller in making a decision about the selling or listing price of a property or to determine a bid for purchase; similar to a comparative market analysis (CMA); a fee may or may not be charged; cannot be represented as an appraisal.
Building Classifications: Building classifications in most markets refer to Class “A”, “B”, “C” and sometimes “D” properties. While the rating assigned to a particular building is very subjective, Class “A” properties are typically newer buildings with superior construction and finish in excellent locations with easy access, attractive to credit tenants, and which offer a multitude of amenities such as on-site management or covered parking. These buildings, of course, command the highest rental rates in their sub-market. As the “Class” of the building decreases (i.e. Class “B”, “C” or “D”) one component or another such as age, location or construction of the building becomes less desirable. Note that a Class “A” building in one sub-market might rank lower if it were located in a distinctly different sub-market just a few miles away containing a higher end product.
Building Code: The various laws set forth by the ruling municipality as to the end use of a certain piece of property and that dictate the criteria for design, materials and type of improvements allowed.
Building Standard: A list of construction materials and finishes that represent what the Tenant Improvement (Finish) Allowance/Work Letter is designed to cover while also serving to establish the landlord’s minimum quality standards with respect to tenant finish improvements within the building. Examples of standard building items are: type and style of doors, lineal feet of partitions, quantity of lights, quality of floor covering, etc.
Building Standard Plus Allowance: The landlord lists, in detail, the building standard materials and costs necessary to make the premises suitable for occupancy. A negotiated allowance is then provided for the tenant to customize or upgrade materials.
Build-out: The space improvements put in place per the tenant’s specifications. Takes into consideration the amount of Tenant Finish Allowance provided for in the lease agreement. See also “Tenant Improvement Allowance”
Build-To-Suit: An approach taken to lease space by a property owner where a new building is designed and constructed per the tenant’s specifications.
Capitalization: A method of determining value of real property by considering net operating income divided by a predetermined annual rate of return. See “Capitalization Rate”.
Capitalization Rate: The rate that is considered a reasonable return on investment (on the basis of both
the investor’s alternative investment possibilities and the risk of the investment). Used to determine and value real property through the capitalization process. Also called “free and clear return”. See “Capitalization”.
Carrying Charges: Costs incidental to property ownership, other than interest (i.e. taxes, insurance costs and maintenance expenses), that must be absorbed by the landlord during the initial lease-up of a building and thereafter during periods of vacancy.
Certificate of Occupancy: A document presented by a local government agency or building department certifying that a building and/or the leased premises (tenant’s space) has been satisfactorily inspected and is/are in a condition suitable for occupancy.
Commissions: Earned monies between either a sales agent and a sponsoring broker or the listing agent and the selling broker; the amount is always determined on the listing agreement with the seller; sellers almost always pay these commissions.
Commercial real estate: Any multifamily residential, office, industrial, or retail property that can be bought, sold, or leased in a real estate market.
Common Area: There are two components of the term “common area”. If referred to in association with the Rentable/Usable or Load Factor calculation, the common areas are those areas within a building that are available for common use by all tenants or groups of tenants and their invitees (i.e. lobbies, corridors, restrooms, etc.). On the other hand, the cost of maintaining parking facilities, malls, sidewalks, landscaped areas, public toilets, truck and service facilities, and the like are included in the term “common area” when calculating the tenant’s pro-rata share of building operating expenses.
Common Area Maintenance (CAM): This is the amount of Additional Rent charged to the tenant, in addition to the Base Rent, to maintain the common areas of the property shared by the tenants and from which all tenants benefit. Examples include: snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, etc. Most often, this does not include any capital improvements that are made to the property.
Comparables: Lease rates and terms of properties similar in size, construction quality, age, use, and typically located within the same sub-market and used as comparison properties to determine the fair market lease rate for another property with similar characteristics.
Comparative Market Analysis (CMA): An estimate of the current value of a property using only a few indicators taken from closed sales of properties similar to the subject property, such as price per square foot and added features; this cannot be called an appraisal.
Concessions: Cash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses, cabling expenses or other monies expended to influence or persuade the tenant to sign a lease.
Construction Management: The actual construction process is overseen by a qualified construction manager who ensures that the various stages of the construction process are completed in a timely and seamless fashion, from getting the construction permit to completion of the construction to the final walk-through of the completed leased premises with the tenant.
Consumer Price Index (“CPI”): Measures inflation in relation to the change in the price of a fixed market basket of goods and services purchased by a specified population during a “base” period of time. It is not a true “cost of living” factor and bears little direct relation to actual costs of building operation or the value of real estate. The CPI is commonly used to increase the base rental periodically as a means of protecting the landlord’s rental stream against inflation or to provide a cushion for operating expense increases for a landlord unwilling to undertake the record keeping necessary for operating expense escalations.
Contiguous Space: (1) Multiple suites/spaces within the same building and on the same floor which can be combined and rented to a single tenant. (2) A block of space located on multiple adjoining.
Deed: A legal instrument transferring title to real property from the seller to the buyer upon the sale of such property.
Deed In Lieu Of Foreclosure: A deed given by an owner/borrower to a lender to satisfy a mortgage debt and avoid foreclosure. See also “Foreclosure”.
Deed Of Trust: An instrument used in many states in place of a mortgage by which real property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), to secure repayment of a debt.
Default: The general failure to perform a legal or contractual duty or to discharge an obligation when due. Some specific examples are: 1) Failure to make a payment of rent when due. 2) The breach or failure to perform any of the terms of a lease agreement.
Demising Walls: The partition wall that separates one tenant’s space from another or from the building’s common area such as a public corridor.
Depreciation: Spreading out the cost of a capital asset over its estimated useful life or a decrease in the usefulness, and therefore value, of real property improvements or other assets caused by deterioration or obsolescence.
Dollar Stop: An agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases. May be applied to specific expenses (e.g., property taxes or insurance).
Due diligence: The process of examining a property, related documents, and procedures conducted by or for the potential lender or purchaser to reduce risk. Applying a consistent standard of inspection and investigation, one can determine if the actual conditions do or do not reflect the information as represented.
Earnest Money: The monetary advance by a buyer of part of the purchase price to indicate the intention and ability of the buyer to carry out the contract.
Easement: A right of use over the property of another created by grant, reservation, agreement, prescription or necessary implication. It is either for the benefit of adjoining land (“appurtenant”), such as the right to cross A to get to B., or for the benefit of a specific individual (“in gross”), such as a public utility easement.
Escalation Clause: A clause in a lease which provides for the rent to be increased to reflect changes in expenses paid by the landlord such as real estate taxes, operating costs, etc. This may be accomplished by several means, such as fixed periodic increases, increases tied to the Consumer Price Index, or adjustments based on changes in expenses paid by the landlord in relation to a dollar stop or base year reference.
Escrow Agreement: A written agreement made between the parties to a contract and an escrow agent. The escrow agreement sets forth the basic obligations of the parties, describes the monies (or other things of value) to be deposited in escrow, and instructs the escrow agent concerning the disposition of the monies deposited.
Exclusive Agency Listing: A written agreement between a real estate broker and a property owner in which the owner promises to pay a fee or commission to the broker if specified real property is leased during the listing period. The broker need not be the procuring cause of the lease.
Expense Stop: An agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases. May be applied to specific expenses (e.g., property taxes or insurance).
Face Rental Rate: The “asking” rental rate published by the landlord.
Fair Market Value: The sale price at which a property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. Also known as FMV.
First Generation Space: Generally refers to new space that is currently available for lease and has never before been occupied by a tenant. See also “Second Generation Space.
First Refusal Right or Right Of First Refusal (Purchase): A lease clause giving a tenant the first opportunity to buy a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept.
First Refusal Right or Right Of First Refusal (Adjacent Space): A lease clause giving a tenant the first opportunity to lease additional space that might become available in a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept. This right is often restricted to specific areas of the building such as adjacent suites or other suites on the same floor.
Flex Space: A building providing its occupants the flexibility of utilizing the space. Usually provides a configuration allowing a flexible amount of office or showroom space in combination with manufacturing, laboratory, warehouse distribution, etc. Typically also provides the flexibility to relocate overhead doors. Generally constructed with little or no common areas, load-bearing floors, loading dock facilities and high ceilings.
Foreclosure: A procedure by which the mortgagee (“lender”) either takes title to or forces the sale of the mortgagor’s (“borrower”) property in satisfaction of a debt. See also “Deed In Lieu Of Foreclosure”.
Full Service Rent: An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount. See also “Pass Throughs”.
Future Proposed Space: Space in a proposed commercial development which is not yet under construction or where no construction start date has been set. Future Proposed projects include all those projects waiting for a lead tenant, financing, zoning, approvals or any other event necessary to begin construction. Also may refer to the future phases of a multi-phase project not yet built.
General Contractor: The prime contractor who contracts for the construction of an entire building or project, rather than just a portion of the work. The general contractor hires subcontractors, (e.g., plumbing, electrical, etc.), coordinates all work, and is responsible for payment to subcontractors.
General market factors: Factors influenced by the demographic, economic, and locational characteristics and the organizational aspects of a market.
Government incentives: Concession given or measures taken by local or regional government to attract firms or investment dollars to a given locality for the purposes of promoting economic growth and encouraging development.
Gross Building Area: The total floor area of the building measuring from the outer surface of exterior walls and windows and including all vertical penetrations (e.g. elevator shafts, etc.) and basement space.
Gross Lease: A lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc.
Ground Rent: Rent paid to the owner for use of land, normally on which to build a building. Generally, the arrangement is that of a long-term lease (e.g. 99 years) with the lessor retaining title to the land.
Hard Cost: The cost of actually constructing the improvements (i.e. construction costs). See also “Soft Cost”.
Highest and Best Use: The use of land or buildings which will bring the greatest economic return over a given time which is physically possible, appropriately supported, financially feasible.
Hold Over Tenant: A tenant retaining possession of the leased premises after the expiration of a lease.
HVAC: The acronym for “Heating, Ventilating and Air-Conditioning”.
Industrial property: Commercial properties that are used for the purposes of production, manufacturing, or distribution.
Lease: An agreement whereby the owner of real property (i.e., landlord/lessor) gives the right of possession to another (i.e., tenant/lessee) for a specified period of time (i.e., term) and for a specified consideration (i.e., rent).
Lease Agreement: The formal legal document entered into between a Landlord and a Tenant to reflect the terms of the negotiations between them; that is, the lease terms have been negotiated and agreed upon, and the agreement has been reduced to writing. It constitutes the entire agreement between the parties and sets forth their basic legal rights.
Lease buyout: The process by which a landlord, tenant, or third party pays to extinguish the tenant’s remaining lease obligation and rights under its existing lease agreement.
Lease Commencement Date: The date usually constitutes the commencement of the term of the Lease for all purposes, whether or not the tenant has actually taken possession so long as beneficial occupancy is possible. In reality, there could be other agreements, such as an Early Occupancy Agreement, which have an impact on this strict definition.
Leasehold Improvements: Improvements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by Landlord. See also “Tenant Improvements”.
Leasing: A means of obtaining the physical and partial economic use of a property for a specified period without obtaining an ownership interest.
Lessee: The person renting or leasing the property. Also known as a tenant.
Lessor: The person who rents or leases a property to another. Also known as a landlord.
Letter Of Credit: A commitment by a bank or other person, made at the request of a customer, that the issuer will honor drafts or other demands for payment upon full compliance with the conditions specified in the letter of credit. Letters of credit are often used in place of cash deposited with the landlord in satisfying the security deposit provisions of a lease.
Letter Of Intent (LOI): A preliminary agreement stating the proposed terms for a final contract. They can be “binding” or “non-binding”. This is the threshold issue in most litigation concerning letters of intent. The parties should always consult their respective legal counsel before signing any Letter of Intent.
Lien: A claim or encumbrance against property used to secure a debt, charge, or the performance of some act. Includes liens acquired by contract or by operation of law. Note that all liens are encumbrances but all encumbrances are not liens.
Lien Waiver (Waiver of Liens): A waiver of mechanic’s lien rights, signed by a general contractor and his subcontractors, that is often required before the general contractor can receive a draw under the payment provisions of a construction contract. May also be required before the owner can receive a draw on a construction loan.
Like-Kind Property: A term used in an exchange of property held for productive use in a trade or business or for investment. Unless cash is received, the tax consequences of the exchange are postponed pursuant to Section 1031 of the Internal Revenue Code.
Listing Agreement: An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation. See also “Exclusive Listing Agreement”.
Market analysis: The process of examining market supply and demand conditions, demographic characteristics, and opportunities; identifying alternative locations/sites that meet specific objectives or satisfy various criteria; and assessing the financial feasibility of those locations/sites to facilitate decision making regarding the commercial potential or suitability of various locations/sites to support a given activity or use.
Market Rent: The rental income that a property would command on the open market with a landlord and a tenant ready and willing to consummate a lease in the ordinary course of business; indicated by the rents that landlords were willing to accept and tenants were willing to pay in recent lease transactions for comparable space.
Market Study: A forecast of future demand for a certain type of real estate project that includes an estimate of the square footage that can be absorbed and the rents that can be charged. Also called “Marketability Study”.
Market Value: The highest price a property would command in a competitive and open market under all conditions requisite to a fair sale with the buyer and seller each acting prudently and knowledgeably in the ordinary course of trade.
Mixed-Use: Space within a building or project providing for more than one use (i.e., a loft or apartment project with retail, an apartment building with office space, an office building with retail space).
Mortgage: A written instrument creating an interest in real estate and that provides security for the performance of a duty or the payment of a debt. The borrower (i.e., mortgagor) retains possession and use of the property.
Moving allowance: A specified dollar amount paid by the owner to cover, in part or in whole, the tenant’s moving expenses.
Moving expenses: The cost incurred by the tenant to move into the new space. The landlord may pay a portion or all, depending on what is negotiated in the lease. Also see moving allowance.
Net Lease: A lease in which there is a provision for the tenant to pay, in addition to rent, certain costs associated with the operation of the property. These costs may include property taxes, insurance, repairs, utilities, and maintenance. There are also “NN” (double net) and “NNN” (triple net) leases. The difference between the three is the degree to which the tenant is responsible for operating costs. See also “Gross Lease”.
Net Rentable Area: The floor area of a building that remains after the square footage represented by vertical penetrations, such as elevator shafts, etc., has been deducted. Common areas and mechanical rooms are included and there are no deductions made for necessary columns and projections of the building.
Non-Compete Clause: A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building. This clause benefits service-oriented businesses desiring exclusive access to the building’s population (i.e. travel agent, deli, etc.).
Normal Wear and Tear: The deterioration or loss in value caused by the tenant’s normal and reasonable use. In many leases the tenant is not responsible for “normal wear and tear”.
Single story – one story only on ground level.
Low-rise – Fewer than seven stories high above ground level.
Mid-rise – Between seven and twenty-five stories above ground level
High-rise – Higher than twenty-five stories above ground level.
Office property: A commercial property type used to maintain or occupy professional or business offices. Such properties typically house management and staff operations. The term office can refer to whole buildings, floors, parts of floors, and office parks. Office space that can be used for a variety of purposes is sometimes referred to as generic office space. Office properties may be classified as Class A, B, or C. Class A properties are the most functionally modern and typically offer the most amenities. Properties Classed B and C in the same market typically command lower rents because they are older and in some instances are in need of modernization.
Operating Expenses: The actual costs associated with operating a property including maintenance, repairs, management, utilities, taxes and insurance. A landlord’s definition of operating expenses is likely to be quite broad, covering most aspects of operating the building.
Operating Expense Escalation: Although there are many variations of operating expense escalation clauses, all are intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of buildings.
Parking Ratio or Index: The intent of this ratio is to provide a uniform method of expressing the amount of parking that is available at a given building. Dividing the total rentable square footage of a building by the building’s total number of parking spaces provides the amount of rentable square feet per each individual parking space (expressed as 1/xxx or 1 per xxx). Dividing 1000 by the previous result provides the ratio of parking spaces available per each 1000 rentable square feet (expressed as x per 1000).
Pass Throughs: Refers to the tenant’s pro rata share of operating expenses (i.e. taxes, utilities, repairs) paid in addition to the base rent.
Percentage Lease: Refers to a provision of the lease calling for the landlord to be paid a percentage of the tenant’s gross sales as a component of rent. There is usually a base rent amount to which “percentage” rent is then added. This type of clause is most often found in retail leases.
Plat (Plat Map): Map of a specific area, such as a subdivision, which shows the boundaries of individual parcels of land (e.g. lots) together with streets and easements.
Precast Concrete: Concrete components (i.e. walls) of a building which are fabricated at a plant site and then shipped to the site of construction.
Pro rata: Proportionately; according to measure, interest, or liability. In the case of a tenant, the proportionate share of expenses for the maintenance and operation of the property. See also “Common Area” and “Operating Expenses”.
Punch List: An itemized list, typically prepared by the architect or construction manager, documenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete.
Raw Land: Unimproved land that remains in its natural state.
Raw Space: Unimproved “shell space” in a building.
REO (Real Estate Owned): Real estate that has come to be owned by a lender, including real estate taken to satisfy a debt. Includes real estate acquired by lenders through foreclosure or, in settlement of some other obligation.
Rehab: An extensive renovation of a building or project which is intended to cure obsolescence of such building or project.
Renewal Option: A clause giving a tenant the right to extend the term of a lease, usually for a stated period of time and at a rent amount as provided for in the option language.
Rent: Compensation or fee paid, usually periodically (i.e. monthly rent payments, for the occupancy and use of any rental property, land, buildings, equipment, etc.)
Rent Commencement Date: The date on which a tenant begins paying rent. The dynamics of a marketplace will dictate whether this date coincides with the lease commencement date or if it commences months later (i.e., in a weak market, the tenant may be granted several months free rent). It will never begin before the lease commencement date.
Rent escalators: Items specified in a lease such as base rent, operating expenses, and taxes that may increase by predetermined amounts at stated intervals or by a constant annual percentage.
Rentable area: The computed area of a building as defined by the guidelines of Building Owners and Managers Association (BOMA) and typically measured in square feet, including both core/structure and useable area. The actual square foot area for which the tenant will pay rent. It is the gross area of an office building, less uninterrupted vertical space (such as stairways and elevators). Unlike useable area, rentable area includes common areas such as lobbies, restrooms, and hallways as well as the measurement of structural columns and architectural projections.
Rental Concession: Concessions a landlord may offer a tenant in order to secure their tenancy. While rental abatement is one form of a concession, there are many others such as: increased tenant improvement allowance, signage, lower than market rental rates and moving allowances are only a few of the many. See also “Abatement”.
Representation Agreement: An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation. See also “Exclusive Listing Agreement”.
Request for Proposal (RFP): The formalized Request for Proposal represents a compilation of the many considerations that a tenant might have and should be customized to reflect their specific needs. Just as the building’s standard form lease document represents the landlord’s “wish list”, the RFP serves in that same capacity for the tenant.
Retail property: Properties used exclusively to market and sell consumer goods and services.
Right Of First Refusal: See “First Refusal Right”.
Sale-Leaseback: An arrangement by which the owner occupant of a property agrees to sell all or part of the property to an investor and then lease it back and continue to occupy space as a tenant. Although the lease technically follows the sale, both will have been agreed to as part of the same transaction.
Small Business Administration (SBA): A federal government agency that supports entrepreneurs and small businesses.
Second Generation or Secondary Space: Refers to previously occupied space that becomes available for lease, either directly from the landlord or as sublease space. See also “First Generation Space.”
Security Deposit: A deposit of money by a tenant to a landlord to secure performance of a lease. This deposit can also take the form of a Letter of Credit or other financial instrument.
Setback: The distance from a curb, property line or other reference point, within which building is prohibited.
Setback Ordinance: Setback requirements are normally provided for by ordinances or building codes. Provisions of a zoning ordinance regulate the distance from the lot line to the point where improvements may be constructed.
Shell Space: The interior condition of the tenant’s usable square footage when it is without improvements or finishes. While existing improvements and finishes can be removed, thus returning space in an older building to its “shell” condition, the term most commonly refers to the condition of the usable square footage after completion of the building’s “shell” construction but prior to the build out of the tenant’s space. Shell construction typically denotes the floor, windows, walls and roof of an enclosed premises and may include some HVAC, electrical or plumbing improvements but not demising walls or interior space partitioning. In a new multi-tenant building, the common area improvements, such as lobbies, restrooms and exit corridors may also be included in the shell construction. With a newly constructed office building, there will often be a distinction between improvements above and below the ceiling grid. In a retail project, all or a portion of the floor slab is often installed along with the tenant improvements so as to better accommodate tenant specific under-floor plumbing requirements.
Site Analysis: The study of a specific parcel of land which takes into account the surrounding area and is meant to determine its suitability for a specific use or purpose.
Site Development: The installation of all necessary improvements, (i.e. installment of utilities, grading, etc.), made to a site before a building or project can be constructed upon such site.
Site Plan: A detailed plan which depicts the location of improvements on a parcel of land which also contains all the information required by the zoning ordinance.
Soft Cost: That portion of an equity investment other than the actual cost of the improvements themselves (i.e. architectural and engineering fees, commissions, etc.) and which may be tax-deductible in the first year. See also “Hard Cost”.
Space Plan: A graphic representation of a tenant’s space requirements, showing wall and door locations, room sizes, and sometimes includes furniture layouts. A preliminary space plan will be prepared for a prospective tenant at any number of different properties and this serves as a “test-fit” to help the tenant determine which property will best meet its requirements. When the tenant has selected a building of choice, a final space plan is prepared which speaks to all of the landlord and tenant objectives and then approved by both parties. It must be sufficiently detailed to allow an accurate estimate of the construction costs. This final space plan will often become an exhibit to any lease negotiated between the parties.
Special Assessment: Any special charge levied against real property for public improvements (e.g., sidewalks, streets, water and sewer, etc.) that benefit the assessed property.
Strip Center: Any shopping area, generally with common parking, comprised of a row of stores but smaller than the neighborhood center anchored by a grocery store.
Tax Base: The assessed valuation of all the real property that lies within the jurisdiction of a taxing authority, which is then multiplied by the tax rate or mill levy to determine the amount of tax due.
Tenant (Lessee): One who rents real estate from another and holds an estate by virtue of a lease.
Tenant Improvements: Improvements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by the landlord. See also “Leasehold Improvements”, “Workletter”.
Tenant Improvement (“TI”) Allowance or Work Letter: Defines the fixed amount of money contributed by the landlord toward tenant improvements. The tenant pays any of the costs that exceed this amount. Also commonly referred to as “Tenant Finish Allowance.”
Title: The means whereby the owner of lands has the just and full possession of real property.
Title Insurance: A policy issued by a title company after searching the title and which insures against loss resulting from defects of title to a specifically described parcel of real property, or from the enforcement of liens existing against it at the time the title policy is issued.
Title Search: A review of all recorded documents affecting a specific piece of property to determine the present condition of title.
Trade area: An area delineated about a central or dominant location, comprising a zone that is dependent upon production output from that location to meet internal demand, whose outermost boundaries are defined in terms of the presence or absence of interactions with that central or dominant location (for example, a localized area over which some specific activity or transaction takes place). Note that in central place theory context, the terms trade area and range are used interchangeably.
Trade Fixtures: Personal property that is attached to a structure (i.e. the walls of the leased premises) that are used in the business. Since this property is part of the business and not deemed to be part of the real estate, it is typically removable upon lease termination.
Triple Net (NNN) Rent: A lease in which the tenant pays, in addition to rent, certain costs associated with a leased property, which may include property taxes, insurance premiums, repairs, utilities, and maintenances. There are also “Net Leases” and “NN” (double net) leases, depending upon the degree to which the tenant is responsible for operating costs. See also “Gross Lease”.
Turn Key Project: The construction of a project in which a third party, usually a developer or general contractor, is responsible for the total completion of a building (including construction and interior design) or, the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant.
Under Contract: A property for which the seller has accepted the buyer’s offer to purchase is referred to as being “under contract”. Generally, the prospective buyer is given a certain period of time in which to perform its due diligence and finalize financing arrangements. During the period of time the property is under contract, the seller is precluded from entertaining offers from other buyers.
Unimproved Land: Most commonly refers to land without improvements or buildings but can also mean land in its natural state.
Use: The specific purpose for which a parcel of land or a building is intended to be used or for which it has been designed or arranged.
Usable Square Footage: Usable Square Footage is the area contained within the demising walls of the tenant space. Total Usable Square Footage equals the Net Square Footage x the Circulation Factor.
Vacancy Rate: The total amount of available space compared to the total inventory of space and expressed as a percentage. This is calculated by multiplying the vacant space times 100 and then dividing it by the total inventory.
Vacant Space: Refers to existing tenant space currently being marketed for lease. This excludes space available for sublease.
Variance: Refers to permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship. Included would be such things as the particular physical surroundings, shape or topographical condition of the property, and when compliance would result in a practical difficulty and would deprive the owner of the reasonable use of the property.
Workletter: A list of the building standard items that the landlord will contribute as part of the tenant improvements. Examples of the building standard items typically identified include: style and type of doors, lineal feet of partitions, type and quantity of lights, quality of floor coverings, number of telephone and electrical outlets, etc. The Workletter often carries a dollar value but is contrasted with a fixed dollar tenant improvement allowance that can be used at the tenant’s discretion. See also Leasehold Improvements and Tenant Improvements.
Working Drawings: The set of plans for a building or project that comprise the contract documents that indicate the precise manner in which a project is to be built. This set of plans includes a set of specifications for the building or project.
Zoning: The division of a city or town into zones and the application of regulations having to do with the structural, architectural design, and intended use of buildings within such designated zone (i.e. a tenant needing manufacturing space would look for a building located within an area zoned for manufacturing).
Zoning Ordinance: Refers to the set of laws and regulations, generally, at the city or county level, controlling the use of land and construction of improvements in a given area or zone.