office-space-commercial-real-estate-terms

When you’re looking for great office space, you have to navigate not only the market but a seemingly endless list of commercial real estate terms. Here are a few key terms to know:

  1. Add-On Factor: This is the share of common area space that a tenant has in a property (e.g., lobbies, restrooms). It can help determine the total rentable area. For example, if a tenant occupies 6,000 square feet of usable office space with 10% add on, the rentable square footage would be 6,600.
  2. As-Is/As-Built: The space is leased in its present condition, and if a tenant wants improvements or upgrades, they must pay for them.
  3. Buildout: This term refers to the extent to which a building has been finished. A shell, for example, has drywall and a carpet. It also indirectly refers to the timeline for moving in.
  4. Build-to-Suit. Here, the landlord builds or customized the space to a tenant’s specifications.
  5. Class A, B, or C. These classifications give you insight into the condition and location of the building along a scale (A being best).
  6. Common Area Maintenance. CAM is an annual charge which tenants pay for the maintenance of bathrooms, hallways, lobbies, health facilities, and other common areas.
  7. Effective Rate. The amount a tenant pays annually per square foot is the “effective rate.”
  8. Expense stop. This is the amount that the landlord agrees to pay for expenses related to the building. If they exceed this, the tenant pays based on their square footage.
  9. Full Service Lease. Here, the rent amount includes expenses related to the building (e.g. gas, water, electricity, real estate taxes, insurance, maintenance, etc.). The tenant is typically obligated to pay for operating expense or tax increases above their expense stop (this is called the “pass through”).
  10. Gross Lease. In this case, the rental amount includes rent, maintenance, and utilities but not pass-throughs.
  11. Operating Costs. These are costs of running the building and property, such as electricity, gas, water, landscaping, building maintenance, insurance, real estate taxes, and management fees.
  12. Parking Ratio. The total number of parking spaces is divided by the size of the building. For example, a ratio of 1:300 means that a tenant is allowed one parking spot for every 300 square feet of the building.
  13. Triple Net Lease. Here, the lessee is required to pay for their share of the property’s taxes, maintenance, and insurance.
  14. Turnkey. Turnkey properties are ready to move in, and the buildout has been completed to their specifications.
  15. Usable Square Feet. This is the square footage that a tenant can use or work in.

One more term to know: KW Commercial. We’re here to help you navigate commercial real estate terms, searches, analytics, market studies, negotiations, and every other step of the process. Contact us today!

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