Glossary of Commercial Real Estate Terms
Above Building Standard
Interior construction materials and labor not included in a Landlord’s “normal or typical” construction work letter or allowance letter, subject to negotiation between Landlord and Tenant.
Absolute Net Lease
A lease in which the Tenant has agreed to pay the Landlord (or owner) a basic rent. This amount usually covers debt service (mortgage, principal and interest) and a profit for the Landlord. Tenant also agrees to be responsible and separately pay for all maintenance, operating and other expenses of the building and/or office suite. These separate items would include utilities (electric, gas), all maintenance, operating expenses (HVAC, elevator contracts, etc.), janitorial services, real estate taxes, insurance premiums, etc.
A number usually expressed as the amount of total square feet (but sometimes as a percentage of the total amount of space that was vacant) of office space that has been put under a lease (not necessarily occupied) between two periods of time.
A term used in space planning to describe how physically close to each other different staff or entire departments must be for an efficient work environment.
When a broker/agent is working for a Landlord as the exclusive leasing agent for a building. Also, an agency exists when a broker/agent is working with an exclusive letter of representation from a Tenant.
The space or air above a piece of property that by definition legally belongs to or is attached to the property. The air rights of a property can be transferred, sold or rented. The term is often associated with a building that has been built over property that is being used for another purpose (the building is said to be using the air rights). The most common examples of an air rights building are those built over a railroad track or right-of-way, or over a road or highway.
A lease clause prohibiting any construction, structural or non-structural additions or improvements, or placement of any fixed decorations in a Tenant’s office space without the written consent of the Landlord. A lease may require all Tenant alterations must be done by or through the Landlord’s contractor.
Any material, goods, services, or intangible items that increase the comfort, attractiveness, desirability and/or value of an office suite or an office building (for example, dry cleaning establishment, low to high priced restaurants, in-building or covered parking, health clubs).
The reduction of the total value of a debt by taking equal (amortized) installments over its actual life.
The working drawings that show the placement and construction detail for building out the office space, including walls, partitions, doors, lights, switches, outlets, etc. From the architectural drawings, engineers and other professionals can create the remaining construction documents such as electrical wiring diagrams.
An incombustible, fibrous mineral once widely used in construction of buildings because of its fireproofing and insulating ability. Most forms of asbestos have been declared health hazards and are illegal in new buildings. Removal of asbestos from older buildings is controlled by federal regulation and procedures.
The determination or setting of a tax or other charge based on an estimation of value of a building. A local government assesses a building and collects a tax from the Landlord for the value of the property. Increases in the amount of tax paid by a Landlord over some agreed on base amount or base year estimated amount is passed on to all of a building’s Tenants in proportion to the amount of office space occupied. In certain instances, a Landlord will (per the lease) estimate the next year’s increase in taxes or operating expenses that are to be passed on to the Tenants. Prior to the actual increase, the Landlord will make an assessment and collect the estimated amount from all Tenants.
The ability to transfer the office space and all obligations of the lease document to another party (individual or entity).
A lease provision whereby the Tenant agrees, in advance, to accept and pay rent or other required payments to a new Landlord or legal owner of the property.
Attorney-in-Fact, Subordination clause
A provision of a lease subordination clause that permits the Landlord to act as an attorney-in-fact for the Tenant and submit on behalf of the Tenant (without any further approval or permission) a certificate of subordination to a lender, trustee, or financing institution.
Available Office Space
Describes office space that is vacant and available for lease but that may or may not be ready for occupancy (i.e., under construction, needs to be built-out to Tenant’s specifications or requires remodeling). The term is used both as a description and as a statistic of “office space available” at a particular time.
Average Rent Per Square Foot
Presented as part of a financial analysis on the economic terms of a lease, it represents the aggregate rent calculated to a particular point in time (five years) and adjusts this total by dividing by the number of years up to that point and the total number of square feet being leased to give the average rent per square foot.
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