Like every industry, commercial real estate has a language of its own. Let’s run through some of the key terminology you must know and understand when plotting your real estate strategy.
Blend and Extend: A strategy where tenants trade early renewal and extended lease length for more favorable lease terms. For more information, read What is a ‘Blend and Extend’?
Build-Out: Refers to the construction of the tenant’s proposed space to make it ready for occupancy. Also referred to as TI or tenant improvements. For more information, read How do I Negotiate the Tenant Improvement Allowance?
Building Class (A, B, C): Building classification may rate how the building is generally accepted in the market, or could be a personal classification by the individual referring to that structure. Buildings are usually referred to as Class A, Class B, or Class C. For more information, read What’s the Difference Between Class A, Class B, and Class C Office Space?
First Right of Refusal: A right given to the tenant stating that before the landlord will lease the space in question (usually expansion space), the tenant will be given the right to lease it first. The first right of refusal is usually negotiated into the lease and is typically governed by an agreed upon time limit. For more information, read Negotiating the Renewal Option.
Rentable Square Footage vs Usable Square Footage: Rentable Square footage is the amount of space the tenant will pay rent on. It includes the space inside the tenant’s suite plus a factor to account for the tenant’s use of common area. Rentable Square Feet is always larger or equal to Usable Square Feet. Usable Square Feet equals the amount of square feet measured within the confines of the tenant’s space – this does not include common area space. For more information, read Rentable Square Feet vs. Useable Square Feet.
Site Selection: Indicates the practice of new facility location. Site selection involves measuring the needs of a new project against the merits of potential locations. For more information, read Rent is NOT the Only Factor to Consider in Your Site Selection.
Sublease: A lease of a property or space by a tenant to a subtenant. For more information, read Pros and Cons of Subleasing Your Office from Another Tenant.
Tenant Improvement Allowance: This is the amount of money the landlord is willing to contribute for the build-out of the tenant’s space. It is usually quoted as “x” amount of dollars per rentable or usable square feet. For more information, read How Do I Negotiate the Tenant Improvement Allowance?
Whatever question you have about commercial real estate, chances are it can be answered by your tenant representation commercial real estate broker. For more on the benefits of tenant representation, click here. For more information about planning an office relocation, click here or contact Troy Golden at [email protected] or (630) 805-2463.
This article was originally published by Troy Golden in the Oak Brook Office Report.
Photo Credit: “Global Education” by hywards Source: freedigitalphotos.net
Great and helpful for many. Like the link to more too…
Turnkey is another one. But watch out for hidden language. i.e. Landlord shall construct tenant improvements on a turnkey basis, in accordance with plans and specs which are referred to as approved and often exhibits to the lease. However landlord might cap their exposure at actual costs not to exceed X dollars. Thus this is not a true turnkey. In this event tenant needs to be very diligent with their review of the plans and specs. Also watch how the excess improvement costs are handled. It is important that both landlord and tenant sign off on a pre-construction approval form that references attached plans and specs with the construction cost breakdown attached [exhibits A, B, & C]. That way everyone agrees on what is actually turnkey delivery. No surprises. If a landlord puts the cap on the “turnkey” it really isn’t a true turnkey delivery.
Great blog. I think it’s important to educate the public about CRE so they can make properly informed decisions. Too often CRE brokers try to keep their clients in the dark to appear more knowledgeable. Your blogs show you have your clients’ best interests in mind.