Glossary of Commercial Real Estate Terms

1) An individual or entity, such as a corporation, who holds or possesses property by any kind of right or title for a specified time period; 2) An individual or entity who pays rent (either monetary or in-kind gift) to use or occupy land, a building, an office suite, a room, or other property owned by another individual or entity.

An addendum or attachment to the lease document that details the responsibilities of both the Tenant and the Landlord as they relate to the construction of the Tenant’s office space. The work letter describes any above-building standard allowances provided to the Tenant, the responsibilities and timing by the developer for providing pricing for other than building standard items, and the estimated completion date of the office space construction. In addition, it outlines the responsibilities and timing of both Tenant and developer for providing appropriate space plans and working and architectural drawings necessary to meet the construction schedule. The work letter also defines the construction work that will be provided by the developer and completed by the Tenant.

The construction, fixtures, attachments, and any and all physical changes and additions made to a Tenant’s office space, for the benefit of the Tenant, by the Tenant (usually with the Landlord’s permission) or on the Tenant’s behalf by the Landlord or a representative (subcontractor) of the Tenant.

The estimated or actual dollar value of the construction funding offered by a Landlord to a Tenant as an inducement to a Tenant to lease office space, also called a “TI” allowance.  The TI Allowance is typically proposed as “X” dollars times the Rentable Square Feet of the leased premises.  The TI Allowance must be utilized for the construction of a Tenant’s proposed interior build-out.

Standard building materials and quantities as identified by a Landlord, which are to be provided at no additional cost to a Tenant to improve Tenant’s space. Normally included are doors; walls; painting; hardware; ceiling; lighting;  window and floor coverings; telephone, computer and electrical outlets; and HVAC.

When a Tenant has control or possession or actually uses the demised premises as defined in a lease. Tenant occupancy is usually taken to mean the Tenant resides in and is conducting business from the premises.

Describes a situation in which there is a large amount of vacant office space available in a given market and few users (relative to the available supply) are looking for this office space. When this situation occurs, Landlords often lower rental rates and offer more and more valuable, concessions (free rent, expanded flexibility) or allowances (Tenant Improvement or Move Allowances) as inducements to Tenants planning to lease office space.  See also Landlord’s Market.

Also called a “Net, Net, Net” Lease, is a lease structure that requires that a Tenant pay Base Rent plus a share of the Operating Expenses of the leased property.  NNN expenses typically are itemized within the following categories: Taxes; Insurance and CAM (Common Area Maintenance) charges. Utility costs are often charged separately either with separate metering or via the Landlord utilizing a pro-rate billing formula.  Lease costs vary each year with a NNN Lease because the Landlord provides an estimate of Operating Expenses each lease year and adjusts for actual expenses at the end of each year. If expenses are greater than estimated, the Tenant pays the difference; if expenses are less than estimated, the Tenant receives a credit.

Complete build-out of a Tenant’s premises to the Tenant’s specifications and at no additional charge to the Tenant.