Base Rent: The amount of minimum stated rent.
This is the amount of money that is applied to owner's mortgage,
capital improvements, and profit.
Gross Lease:
A type of rent calculation where the rent includes the base
rent and all expenses. Expense increases each year of the
lease will be passed on to tenant in the form of Expense
Pass Throughs.
Expense Pass Throughs: Expenses
that the tenant is obligated to pay according to the terms
of the lease. It is customary for tenants to pay their pro-rata
share of expense increases. Expense pass throughs are usually
handled like the escrow account on a home loan, with the
tenant paying an estimated 1/12 each month with an annual
reconciliation.
Expense Stop: This is a
method of implementing expense pass throughs. The tenant
pays expenses over a specified amount per square foot. For
example, the Expense Stop may be $9.00 per square foot.
If expenses are $9.50 per square foot, then the tenant is
responsible for paying $.50 per square foot. Often the first
year (base year) is used to set the expense stop amount
to be used to calculate pass throughs for the following
years.
Triple Net Lease: A type of rent
calculation where the rent cost is split up into a Base
Rent amount and a separate expense amount call Triple Net
(NNN).
Triple Net or "NNN": Typically,
expenses are placed in three categories: taxes, insurance,
and operating expenses. The term "triple net", which is
also written "NNN", means that the tenant pays all expenses
as a separate charge. (It is implied that each "N" refers
to one of each of the categories.) Triple net is a shorthand
real estate way of saying that the tenant pays base rent
plus 100% of all expenses.
Gross Lease vs. Triple Net Lease: These are two ways
that owners handle their books. Both basically have the
same total cost to the tenant. The only major difference
is that a Gross lease has a guaranteed rate for the first
year and a Triple Net lease uses an estimate for the first
year expenses, which can be higher or lower than budgeted.
Square Feet (SF): How commercial space is measured.
The abbreviation SF is often used to mean rentable square
feet when quoted by a broker or on a floor plan.
Usable Square Feet (USF): The space within your
suite that you have exclusive use of.
Rentable Square Feet (RSF): The space calculation
that you pay rent on. This is your usable square feet
multiplied times (1 + your add on factor percentage).
Example: 1,000 USF x (1+.15) = 1,150 RSF.
Add-on Factor / Load Factor: A percentage used
to estimate your portion of the common area outside your
suite. Typically between 10-18%.
Common Area: Building lobby, elevator shafts, hallways,
bathrooms, etc.
Finish Out, Tenant Improvements (TI): Improvements
made to the lease space to suit the tenant such as new
paint, carpet and walls.
Tenant Improvement TI Allowance, Finish Out Allowance:
The dollar amount, usually per square foot of Net Rentable
Area (NRA), paid by the landlord for the improvements
to the space.
Turn Key Finish Out: Refers to the landlord paying
100% of the finish out cost. All you have to do is turn
the key and move in.
Shell Space: Unfinished space without interior
partition walls, carpet, electrical, ceiling grid and
tile, electrical, or duct work. Shell space usually refers
to first generation space in new buildings where the finish
out will be the first for the space.
Request for Proposal (RFP): A one-page
document requesting a written lease proposal from the
landlord, which states the length of term and finish-out
desired by the tenant. This helps the landlord tailor
the proposal to the tenants needs.
Lease Proposal: A non-binding written proposal
from the owners broker saying, "This is what owner will
accept." Included in the lease proposal are all of the
business terms of the proposed lease.
Letter of Intent (LOI): A non-binding document
from the tenant's broker that is used to negotiate the
terms of the lease saying, "This is what the tenant will
accept." Items outlined include: rental rate, move-in
date, tenant improvement allowance and lease term.
Class A: Typical class "A" buildings include amenities
such as covered parking, marble & brass finishes, workout
facilities, and onsite delis. Tenants often include law
firms, financial services and venture capitalists to whom
image is very important.
Class B: Typical class "B" buildings are the most
popular class of buildings. Class "B" buildings have standard
amenities and a quality finish. Image is professional
and priced to suit most office users.
Class C: Typical class "C" buildings are conservatively
built, older properties with few recent improvements.
Class "C" is ideal for non-profits and other budget-sensitive
tenants to which image is of lesser importance.
Traditional Office Space: Traditional multi-tenant
offices provide common area amenities to users, are multiple
story buildings and cater to standard office/administrative
uses.
Industrial: Industrial buildings are used for warehouse
and manufacturing space. Industrial buildings are usually
one-story, concrete buildings with overhead loading doors.
Flex: Flex space is moderately priced and provides
great value for office users. Flex space can be a mix
of office and industrial space. These buildings are often
one-story concrete buildings with windows on one or two
sides. Tenants often have a private exterior entrance
with front door parking and separate restroom facilities
in their space.
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