The net change in occupied space over a given period of time, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy
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.
A transfer by lessee of lessee’s entire estate in the property. Distinguishable from a sublease where the sublessee acquires something less than the lessee’s entire interest.
A set amount used as a minimum rent in a lease with provisions for increasing the rent over the term of the lease.
Actual taxes and operating expenses for a specified base year, most often the year in which the lease commences. Once the base year expenses are known, if the following year or years taxes and operating expenses are higher then a tenant’s base year. Then that tenant will be charged the difference.
Building classifications in most markets refer to Class "A", "B", "C". 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" ) 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.
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.
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.
An approach taken to lease space by a property owner where a new building is designed and constructed per the tenant’s specifications.
A method of determining value of real property by considering net operating income divided by a predetermined annual rate of return.
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".
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.
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 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. 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.
(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 floors in a building (i.e., a tenant leases floors 6 through 12 in a building).
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.
The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant, usually expressed as an average rate over the term of the lease. Face Rental Rate: The “asking” rental rate published by the landlord. First Generation Space: Generally refers to new space that is currently available for lease and has never before been occupied by a tenant.
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.
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.
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. 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.
One who makes a guaranty.
Agreement whereby the guarantor undertakes collaterally to assure satisfaction of the debt of another or perform the obligation of another if and when the debtor fails to do so. Differs from a surety agreement in that there is a separate and distinct contract rather than a joint undertaking with the principal.
A tenant retaining possession of the leased premises after the expiration of a lease.
The volume of square footage that is committed to and signed for under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity for buildings under construction or planned.
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.
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
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.
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.
An unimproved area of land or water, or containing only such improvements as are appropriate to the use and enjoyment of the open area, and dedicated for public or private use or enjoyment or for the use and enjoyment of owners and occupants of land adjoining or neighboring such open spaces.
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.
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).
Refers to the tenant's pro rata share of operating expenses (i.e. taxes, utilities, repairs) paid in addition to the base rent.
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.
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.
Rentable Square Footage
Rentable Square Footage equals the Usable Square Footage plus the tenant’s pro rata share of the Building Common Areas, such as lobbies, public corridors and restrooms. The pro-rata share, often referred to as the Rentable/Usable (R/U) Factor, will typically fall in a range of 1.10 to 1.16, depending on the particular building. Typically, a full floor occupancy will have an R/U Factor of 1.10 while a partial floor occupancy will have an R/U Factor of 1.12 to 1.16 times the Usable Area.
That number obtained when the Total Rentable Area in a building is divided by the Usable Area in the building. The inverse of this ratio describes the proportion of space that an occupant can expect to actually utilize/physically occupy.
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.
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. Second Generation: Refers to previously occupied space that becomes available for lease, either directly from the landlord or as sublease space.
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.
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.
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.
Tenant ImprovementsImprovements 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.
Tenant Improvement (“TI”) Allowance
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.
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. Turn Key: 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.
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.
A percentage of the total amount of physically vacant space divided by the total amount of existing inventory.
Space that is not currently occupied by a tenant, regardless of any lease obligation on the space.
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.
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