Glossary of Commercial Real Estate Terms
The rental rate identified in a lease; can sometimes be discounted via concessions offered by the Landlord. Also called “pay rate.”
Fair Market Value
The rental rate of space in another building that is similar to the building where a Tenant’s leased premises are located; often used for comparison purposes in establishing rental adjustments for future expansion or renewal of a lease.
A rental rate that remains the same throughout the lease term.
Floor Area Ratio (F.A.R.)
The approved zoning ratio that permits, because of vertical ascension, the building of some multiple amount of square feet of commercial office or other space for each square foot of actual land owned or purchased, subject to other restrictions such as setback requirements or vehicle parking areas (as in the suburbs).
A term used to denote how efficiently an individual building floor can be converted to or used as office space. A preliminary measure of floor efficiency is the building core percentage, offering only a relative measure of the potential efficiency of a floor. To assess a floor’s office space efficiency accurately, the following information must be known: shape of floor, actual location of the building core (center of building or off to the side), fire stairwell locations, column distances and distances between window mullions. The distance between window mullions helps determine the optimal or maximum office width (mullions four feet apart allow office widths of 8, 12 and 16 feet, whereas mullions five feet apart would require 10, 15, or 20 foot office widths). The window mullion distance helps determine the maximum number of windowed offices a floor could have. The bay size and/or distance between columns helps determine both an office, hallway or secretarial location configuration (depending on bay depth from a window) and the largest clear span area (or width) available for a large conference room.
The amount of rentable area on one whole floor; sometimes called the footprint.
A period of time in which a Tenant occupies its space, but does not pay rent. May or may not include operating expenses or triple net (NNN) charges.
In a limited partnership, the general partner provides administration and management to the business relationship. The general partner may or may not have funds invested in the partnership. In a general partnership, each partner shares, not necessarily equally, in the startup and operating funds, responsibility for administration and management and any profits and/or losses.
A rental rate, which includes all normal building standard services as provided by the Landlord, especially in office building leases. This differs for office versus industrial or retail space.
An agreement whereby an individual or entity (known as the guarantor) assures the Landlord that the Tenant signing the lease will make timely payment of rent and will fulfill all other conditions and obligations of the lease. In the event of any default by the Tenant, the guarantor promises to assume all responsibility for the payment of rent and the lease itself. A Landlord may waive the requirement for a security and/or advanced rent deposit(s) when there is a guaranty to a lease.
The period that a Tenant remains in possession of the leased premises beyond the expiration or termination date of the lease document. Holding over can occur with or without Landlord’s consent or permission and typically provide for a month to month tenancy. However, many Leases contain a provision allowing Landlords to charge Tenants that are Holding Over a substantial (25% – 100%) Hold Over Penalty.
An extremely high rent intended as a penalty to a Tenant that continues to use or remain in possession of a leased premises beyond the lease term. A holdover rent of at least one and one-half or two times the monthly rent may be in effect beginning on the last day of the lease term.
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