Commercial Real Estate Glossary

Absorption
How much space is leased or vacated in a market over a set period.

Add-On Factor (Load Factor)
The percentage added to a tenant’s usable space to cover shared common areas. Determines rentable square feet.

Anchor Tenant
A major tenant that drives traffic to a center, such as a grocery store.

Assignment
When a tenant transfers their entire lease to another party who then becomes responsible for it.

Base Rent
The starting rent a tenant pays for the space before operating expenses.

BOMA Standard
A standard for measuring office space so tenants and landlords use the same method.

Build-Out
Construction or improvements made to prepare a space for the tenant’s use.

Build-to-Suit
A space designed and built specifically for one tenant.

CAM (Common Area Maintenance)
Shared costs for parking, landscaping, lighting, walkways, and other common areas.

Cap Rate (Capitalization Rate)
A simple way to estimate the return on an investment property. NOI divided by the purchase price.

Cold Dark Shell
Space delivered without lights, HVAC, ceilings, or finishes.

Co-Tenancy Clause
A retail clause that protects tenants if key tenants leave or close.

Credit Tenant
A tenant with strong financial strength, lowering the landlord’s risk.

Curable Obsolescence
A fixable issue that lowers the property’s value, such as outdated interiors.

Demising Wall
The wall separating one tenant’s space from another.

Delivery Condition
The agreed condition of the space when the landlord hands it over.

Due Diligence Period
Time set aside for inspections, financial review, zoning checks, and other evaluations before committing.

Economic Occupancy
The actual income collected compared to potential income at full rent.

Estoppel Certificate
A document confirming a tenant’s lease details, often used during property sales.

Exclusive Use
Prevents the landlord from leasing nearby space to direct competitors.

Flex Space
A mix of warehouse and office space, common for service and light industrial users.

Full Service Lease
A lease where the landlord covers most operating expenses. Common in office buildings.

Good Guy Guarantee
A limited guarantee where the tenant is responsible only until they vacate and return the space in good condition.

Gross Lease
A lease where the tenant pays one fixed amount while the landlord pays operating expenses.

Gross Leasable Area (GLA)
The total amount of space available for tenants to rent.

Ground Lease
A long-term lease of land only. The tenant builds and controls improvements on the site.

Guarantor
A person or entity that backs the tenant’s financial obligations.

Hard Costs
Direct construction costs such as materials, labor, HVAC, and mechanical systems.

Holdover
When a tenant stays after the lease ends. Usually comes with higher rent.

Improvements
Upgrades or construction inside the space, typically part of the build-out process.

Industrial Space
Space used for warehousing, distribution, storage, light manufacturing, or service operations.

In-Line Space
A retail storefront positioned between other tenants in a shopping center.

Lease Commencement Date
The date the lease officially begins.

Letter of Intent (LOI)
A written outline of the key deal terms before the full lease is drafted.

Load Factor
The difference between usable and rentable square feet, accounting for shared spaces.

Market Rent
The typical rent for similar properties in the same area.

Modified Gross Lease
A lease where the tenant pays base rent plus some expenses while the landlord pays others.

NNN (Triple Net Lease)
A lease where the tenant pays base rent plus property taxes, insurance, and common area costs.

NOI (Net Operating Income)
Income left after operating expenses are paid, before financing.

Operating Expenses
Costs tied to running the property, such as maintenance, landscaping, and repairs.

Option to Renew
A tenant’s right to extend their lease for additional time.

Parking Ratio
The number of parking spaces per 1,000 square feet of building area.

Personal Guarantee
When the business owner is personally liable for the lease.

Pro Rata Share
A tenant’s share of common area expenses, based on their percentage of the property.

Rent Abatement
A period of reduced or free rent, often given during build-out.

Rent Commencement Date
The date the tenant begins paying rent, which may differ from when they receive the space.

Rentable Square Feet (RSF)
Usable square footage plus the tenant’s share of common areas.

Right of First Offer (ROFO)
Gives the tenant the first chance to negotiate on available space.

Right of First Refusal (ROFR)
Allows the tenant to match another party’s offer.

Shadow Anchor
A large tenant near the property that draws traffic but is not owned by the landlord.

Shell Condition
The state of the space when delivered, typically cold shell, grey shell, or vanilla shell.

Soft Costs
Non-construction costs like design, engineering, permits, and legal expenses.

Sublease
When a tenant leases part or all of their space to another party while still being responsible to the landlord.

Submarket
A smaller geographic area within a metro region, such as Cape Coral or South Fort Myers.

Tenant Improvements (TI)
Funds the landlord provides for the tenant to build out their space.

Term
The length of the lease.

TI Allowance
A dollar amount per square foot the landlord contributes toward the build-out.

Turnkey Space
A move-in ready space that needs little to no construction.

Usable Square Feet (USF)
The actual space the tenant occupies inside their suite.

Use Clause
Specifies what type of business can operate in the space.

Vacancy Rate
The percentage of space that is unoccupied in a market or building.

Vanilla Shell
A partially completed space with basic finishes like lighting, drywall, and HVAC already installed.

Work Letter
A document outlining what improvements the landlord will deliver and what the tenant is responsible for.