If you are interested in getting into the commercial real estate market, it is important to be on the same page as your real estate agent. You will need to understand some common terms used in commercial leasing and sales as you are looking to rent or buy a space for your business. There are literally hundreds of terms used in this industry, from abatements to zoning ordinances. Here are 10 commonly used terms you should know when negotiating in commercial leasing and sales either to rent or buy a property.
Commercial Leasing and Sales Important Terms
Real Estate Broker:
A good broker will help you find a place to rent or buy, and will have the expertise to assist you in all aspects of the leasing or purchasing process.
Common Area Maintenance (CAM):
This is the additional rent charged to the tenant to maintain the common areas of the property (landscaping, snow removal or exterior lighting).
Usable Square Footage:
This is the square footage that will be rented by the tenant, including private rest rooms, and storage. It also includes a portion of the common areas, which adds another 10-15 percent to the usable square footage to be rented.
Escalation Clause:
This clause in the lease enables a landlord to increase the rent to account for future expenses paid by the landlord, including increased taxes and operating costs.
Tenant Improvements:
This includes any space the tenant plans to improve. It is wise to have these improvements spelled out in a lease with the landlord before proceeding with plans, and to negotiate with the landlord to have as much of these costs covered by the landlord.
Full Service Rent:
This lease would include an “all inclusive” rent that reflects operating expenses, and taxes for the year. The tenant is usually responsible for any operating expense increases over this base amount.
Gross Lease:
The tenant will pay under this lease a flat amount for rent covering all the landlords expenses, including maintenance costs, taxes, utilities, and insurance.
Net Lease:
The tenant will pay separately for operating costs associated with the building, in addition to a monthly rent. This can result in a potentially large sum that needs to be paid.
Non-Compete Clause:
This clause stipulates that another tenant with a competing business may not lease a space in the same building as you. This will help protect your investment, especially if you are in the service industry.
Letter of Intent:
This is the initial agreement made between the landlord and tenant to proceed with negotiations on a leasing agreement for the property.
Caldwell Commercial is here to help you obtain and negotiate the best possible leasing agreement for your commercial real estate. We are committed to the values that have been ours from the beginning: customized services and optimized investments. To learn more about our properties or services, particularly those dealing with commercial leasing and sales, contact us today.
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