Commercial Real Estate Glossary
A well-known business tenant with a very high credit rating, or one whose national or
local name will lend prestige to a shopping center or office project.
An estimate of the rate at which a particular classification of space-such as new
office space, new housing or new condominium units-will be sold or occupied over a measured period of time.
Positive absorption occurs when there is less space available and negative reflects the converse. A prediction of
this rate is often involved in a feasibility study or an appraisal in connection with a request for
Actual Cost Formula
The formula used to determine a property's taxes and operating expenses for
Add On Factor
A formula that translates a tenant's usable square footage to a landlord's rentable
square footage. The formula is the common area divided by the usable area. The add on factor value is usually
between 5% and 20%.
The practice of representing either the buyer or the seller.
The right to use the space above a specific property. These rights can be leased,
sold or donated.
The paying off of a debt by periodic installments over a specific period of
An estimate or opinion of value of a property. Also, the act of estimating
The value of real property established for the purpose of computing real property
The transfer of the right, title and interest in the property or lease of one person
or entity (assignor), to another (assignee). There are assignments of, among other things, mortgages, sales
contracts, deeds, leases and options.
The agreement of a party to recognize a third party as a permissible successor party
to a contract; most often, the agreement of a tenant to pay rent to a new landlord, especially a mortgagee who has
The specific date that a property will be ready for occupancy.
A detailed financial statement setting forth personal or corporate assets,
liabilities, and net worth (the difference between assets and liabilities) as of a specified date.
The rental cost without including escalations, electricity charges and other
The year that serves as a point of reference for reflecting the change in an
Formal submission of a proposal to purchase property or perform pre-defined work
under specific conditions at a cost noted in the proposal.
The first expression of an intent to enter into an agreement.
Building and Office Manager's Association. National organization of more than 4,000
professionals in the high-rise office building industry, with 80 local BOMA associations.
An understanding or contract in which a landlord or lessor agrees to finish a certain
space to the specifications of a lessee or according to the landlord’s established standards in return for a lease
commitment on the part of the prospective tenant.
A clause that may be included in a lease, granting the lessor or the lessee the right
to terminate the lease term upon the happening of certain stated events or occurrences upon notification and in
most cases consideration.
The rate of interest used in calculating the present value of future periodic
Carpetable Square Feet
The amount of square feet that can be utilized for people and furniture.
Center Core Configuration
A building structure where a core of elevator banks, emergency staircases, plumbing,
electricity and HVAC is located in the center of the building. This center core allows for a traditional layout of
perimeter offices on all sides of the building.
Certificate of Insurance
A document issued by an insurance company to verify coverage.
Certificate of Occupancy
A certificate issued by a governmental authority indicating that a building is fit
for a specific type of occupancy and there are no building code violations.
Class A Building
These buildings are constructed of the highest quality materials and are very well
designed. They are sought by prestigious tenants. These buildings are superbly maintained and very well
Class B Building
These buildings offer useful space without special amenities. They are usually very
functional in layout and design, though not unique. Generally, the maintenance and management is average to
Class C Building
These buildings are older and typically offer space without amenities. The
maintenance, management and HVAC are average to below average.
A dollar amount paid by an owner to a broker for arranging a transaction.
The areas of a property that are used by all tenants or owners, e.g. stairways,
lobby, lavatories, mechanical shafts.
Competing Business Option
An agreement between a landlord and tenant X where the landlord agrees not to rent
other units in a building to another tenant(s) for the same business purpose as tenant X.
A building's capability to provide high speed internet connections, contingent upon
the building's wiring.
A financial inducement to a lessee that is provided by the lessor to cover the cost,
in whole or in part of preparing a structure for the lessee’s occupancy. This allowance could cover costs, such as
for partitions, wiring, lighting and standard carpeting.
A space that is adjacent to and/or adjoining to another space.
The transfer of title or an interest in real property by means of a written
instrument such as a deed or an assignment of lease.
An escalation formula that increases the tenant's rent obligation for building
operating expenses in proportion to changes in the Consumer Price Index (CPI).
A lease drawn directly between the tenant and the owner of the property.
Direct Operating Cost Escalation
A type of escalation where the landlord simply passes on to the tenant the actual
increases in operating costs.
Direct Operating Costs
The expenses incurred in the operation of an office building, such as utilities,
cleaning, supplies, insurance and maintenance.
Directly Metered Electric
The method by which the tenant pays the utility company directly.
Thermometer instrument that measures the amount of heat in the air by the expansion
of a liquid in a graduated glass tube with a reservoir bulb at one end, and by use of a bimetallic strip which
moves the indicator on a scale when heat causes the two metals to expand at different rates on the other end.
Normally used for outdoor temperatures.
A fair, proper and due degree of care and activity. An expressed or implied condition
in certain real estate contracts stating that a person use good-faith efforts to perform obligations under a
There are three methods that landlords use to charge for electricity: directly
metered electric, sub-metered electric and rent inclusion.
The right of government or quasi-government agencies to take private property for a
necessary public use, with just compensation paid to the owner.
Any claim or lien attached to and binding on real property that may lessen value,
obstruct, or impair the use of a property, that may or may not prevent transfer of title, and/or right or interest
Electric Rent Inclusion Factor.
The rent increase, calculated in accordance with the specific method formula agreed
upon in the lease to pay for building operating expenses.
The process where a disinterested third party holds money and/or documents until the
terms and conditions of the instructions (as prepared by the parties to the escrow) have been met.
A signed statement by a party, such as a tenant or mortgagee, verifying for the
benefit of another party that a certain statement of facts is correct as of the date of the statement, such as that
a lease exists, that there are no defaults and that rent is paid to a certain date. Delivery of the statement by
the tenant prevents (estops) the tenant from later claiming a different state of facts.
A written agreement giving a sole agent the right to sell or lease a property for a
specified time, but reserving to the owner the right to sell the property himself without owing a
The representative of the tenant, purchaser or owner who is granted the exclusive
right to negotiate a transaction on that party's behalf.
A written listing of a real property where the seller agrees to appoint only one
broker to sell or lease the property for a specified period of time.
The act of making a document legally valid, such as formalizing a contract by
signing, or acknowledging and delivering a deed. In some cases, implementation of a document may refer solely to
the act of signing; in other cases it may refer to complete performance of the document’s term.
The right of the tenant to lease additional space under specified terms and
A relationship that implies a position of trust or confidence wherein one party is
usually entrusted to hold or manage property or money for another.
Floor Area Ratio
The ratio of a building’s floor area to its corresponding land area. Determined by
dividing the total floor area of the building by the lot area, it is used in zoning ordinances as a formula to
regulate building volume.
The configuration of the building floor, typically shown on a diagram, to show
structure and core configuration.
A legal procedure whereby property used as security for a debt is sold to satisfy the
debt in the event of default in payment of the mortgage note or default of other conditions in the mortgage
The amount that a dollar figure set at one date will be worth at a future
A construction specialist who enters into a formal contract with a developer to
construct a real estate building or project.
The capacity of the generator.
Bona fide; an act is done in good faith if it is in fact done sincerely, whether
negligently or not.
An agreed-on time after an obligation is overdue during which a party can perform
without being considered in default.
A person who receives a conveyance of real property from a grantor.
The person transferring an interest in real property to a grantee.
In commercial leasing, the gross floor area is the entire square footage within the
floor’s perimeter, calculated to the inside finish of the permanent outer building walls or to the glass line in
newer buildings, with no allowance made for structural projections and with a required minimum ceiling height of
A lease of property under which the lessee pays fixed rent and proportionate
increases above a base amount established for real estate taxes and operating costs. Typically assessed on a per
annum or fiscal basis.
The costs that go into the physical improvement of the premises, e.g., HVAC,
telecommunications, wiring/cabling, furniture, fixtures, partitions.
A tenant that stays on the leased premises after his or her lease has
Heating, ventilating and air conditioning.
Valuable additions made to property that add up to more than repairs, costing labor
and capital, and are intended to enhance the value of the property.
Income and Expense Report
A financial report showing the income from the property, operating expenses and the
amount distributed to the owner.
A company that provides immediate office space and business guidance for new
To restore to the victim a loss, in whole or in part, with payment, repair, or
A lien formed by operation of law, such as a real property tax lien, judgment lien or
Joint and Several Liability
A situation in which more than one party is liable for repayment of a debt or obligation and a creditor can obtain
compensation from one or more parties, either individually or jointly. There is usually a right of contribution
among persons who are jointly and severally liable, so that the person who is actually forced to repay the debt can
try to collect equal amounts from the others who also are liable.
The formal decision of a court on the respective rights and claims of the parties to an action or suit. A judgment
that has been entered and recorded with the county recorder usually becomes a general lien on the property of a
A purely statutory general lien on real and personal property belonging to a debtor. A judgment lien differs from a
mortgage in that a judgment lien does not have a specific parcel of real estate given as security at the time that
the debtor-creditor relationship is created.
Arranged construction materials that are delivered to the building site unassembled
but complete and ready to be assembled and installed.
A package offered to a tenant to sign a lease, which might include periods of free
rent, workletter, lease takeover or other such incentives.
An agreement written or unwritten transferring the right to exclusive possession and
use of real estate for a definite period of time.
The summary of the lease drawn between the landlord and the tenant.
Insert your budgeted dollars per square foot and your required square footage. This
tool will compute your company's monthly additional rent costs.
The initial draft of a lease setting forth the terms used as a starting off point for
The number assigned by our website to an individual lease for identification
The landlord's right to recapture the premises leased to a tenant under certain
conditions, typically when a tenant proposes to assign or sublease its space.
The landlord's assumption of a tenant's rights and obligations under a pre-existing
lease at another property.
The length of time for a tenant to occupy a property according to the
The party responsible for leasing space in a building on behalf of an owner. The
leasing agent sometimes acts as the managing agent.
The person to whom property is rented or leased.
The person who rents or leases property to another (lessee).
Letter of Credit
An agreement or commitment by a bank (issuer) made at the request of a customer
(account party), that the bank will honor drafts or other demands of payment from third parties (beneficiaries)
upon compliance with the conditions specified in the letter of credit. Through the issuance of its letter of
credit, the bank agrees to pay the seller’s draft, hereby, substituting the bank’s credit for that of the
Letter of Intent
The expression of a desire to enter into a contract on specified terms and conditions
without assuming any binding obligations.
A charge or claim that one person has on the property of another person as the
security for a debt or obligation.
Line of Credit
Amount of money a bank will lend to one of its most reliable and creditworthy
customers without the need for a formal loan submission. A customer’s line of credit is subject to periodic reviews
of the customer’s credit standing and the overall banking relationship.
The term used to define the general area (i.e. downtown, midtown, midtown south,
upper east side and upper west side).
The percentage of the space attributed to the common areas of the building, or the
proportional share of common areas attributed to a specific space.
Lease expiration date.
The care and work put into a building to keep it in operation and productive use; the
general repair and upkeep of a building. Delayed maintenance contributes to a building’s loss in value.
The party responsible for managing the property on behalf of the owner. This is
sometimes the same as the leasing agent.
A group of properties that would be alternatively competitive to a given typical
Features of the marketplace, including (but not limited to) relative rental costs,
interest rates, demographics, employment levels, vacancy rates and absorption levels.
The price a buyer, willing but not compelled to buy, would pay. Also known as the
lowest price a seller, willing but not compelled to sell, would accept.
Meeting of the Minds
Mutual assent or agreement among the parties to a contract regarding the substance of
the contract. If the parties by their words and acts manifest an intention to be bound to a contract, they can be
In a mortgage deal, the party who receives and holds a mortgage as security for a
debt; the lender; a lender or creditor who holds a mortgage as security for payment of an obligation.
The one who provides a mortgage as security for a debt; the borrower; usually the
landowner, though it could be the owner of a leasehold estate; the borrower or debtor who hypothecates or puts up
his or her property as security for an obligation.
Contiguous areas showing common characteristics of population and homogeneity of land
Net Cost of Occupancy
The total cost of occupying a property for a period, including base rent,
electricity, escalations, construction, amortization, and all other cost components.
A lease under which the tenant pays expenses, such as taxes, insurance and
maintenance in addition to the base rent.
A guarantee by a third party to whom the landlord is obligated that the tenant's
rights under the lease will not be affected by the landlord's default in such obligations to such third
The components of net cost of occupancy other than base rent.
The percentage of a defined market, submarket, or building that contains
A non-binding representation by one party to act or perform in a specified manner
provided that the other party acts or performs in the manner requested. An offer displays an intention to enter
into a contract, as opposed to merely inviting offers from others, as with a listing contract.
A building usually separated into individual offices, used primarily by companies to
The construction of a building or other developments within the boundaries of a
property, thus increasing the property’s value.
Those property management tasks that must be performed on the premises being
Those recurring expenses that are essential to the continuous operation and
maintenance of a property. Operating expenses are generally divided into the following categories: fixed expenses
such as real property taxes and building insurance, variable costs such as utilities, payroll, administration and
property management fees, and reserves for replacement. Operating expenses do not include items such as mortgage
payments, certain capital expenditures and depreciation.
An agreement to remain open, for a set period, an offer to sell or lease real
The payment in full of an existing loan, typically at the time of refinancing or upon
the sale or transfer of a secured property.
A lease whose rental is based on a percentage of the monthly or annual gross sales
made on the premises. Percentage leases are common with large retail stores.
A plan displaying the layout of improvements on a property site; a plot. The plot
plan usually includes location, dimensions, parking areas, landscaping and the like.
Pocket License Card
Proof of real estate licensure, sometimes called a “wallet card,” issued by the state
real estate licensing agency.
Porter's Wage Escalation
An escalation method that charges additional rent per square foot according to
changes in the hourly wage and/or fringe benefits package specified under the building owner's labor union
The act of either actually or constructively possessing or occupying the
Available space that is used for ready-to-go offices on demand. This space may be
rented on a monthly basis.
The amount that a dollar figure payable in the future is worth at the present
Maintenance procedures conducted to prevent later repairs and extending a useful
The tenant's proportionate share of the total space.
The number assigned to an individual property for identification purposes. This
number allows the customer to quickly access specific building information through our search page.
Construction status of a building: existing, under construction or
Per Square Foot
The process of reviewing a prospective borrower's credit and payment capacity before
approving a loan.
A deed of conveyance that operates, in effect, as a release of whatever interest the
grantor has in the property; sometimes called a release deed. The quitclaim deed contains similar language to a
deed, with the important exception that rather than using the words grant and release, it contains language such as
"demise, release and quitclaim".
A fair length of time that may be permitted or required for an act to be completed,
considering the nature of the act and the surrounding circumstances.
Real Estate Board of New York
A recapture provision in an office lease provides the lessor the right to recover any
space that the tenant is unable to occupy or sublease.
A lease condition giving the landlord the right to relocate a tenant.
The right of a tenant to extend its tenancy under specified terms and
Adjustment of rent by the lessor to replicate changes in cost of living or property
Rent Inclusion of Electricity
A method of charging an office tenant for electricity based on its estimated usage
per square foot, rather than its measured usage.
A list of tenants showing the unit occupied and the rent paid by each. Certified rent
rolls are independently confirmed and are sometimes required by lenders.
Rentable Square Feet (RSF)
The square footage used to determine a tenant's base rent. Often a landlord uses a
“rubber ruler” to increase the size of the space.
Fixed periodic payment made by a tenant or occupant of property to the owner for the
possession and use thereof usually by the prior agreement of parties.
Request for a proposal.
Right of First Offer
The right of a person to have the first opportunity either to purchase or lease real
Right of First Refusal
The right of a tenant to match an offer to lease or buy space if an offer is made by
a third party.
Vertical supply pipes that may be used for the distribution of electricity and voice
and data services.
The portion of a rate of return on an investment that is assumed to cover the risk
associated with that deal. The greater the risk, the higher the capitalization rate.
Preliminary architectural drawings and sketches often prepared at the planning stages
of development; basic layouts not containing the final details of design.
Moneys or other consideration (e.g., letter of credit) given to a landlord from a
tenant as security for performance of the tenant's obligations under the lease agreement.
A lease provision which permits the tenant to remedy the landlord's failure to meet
obligations by purchasing the needed services and deducting the cost from the rent.
Side Core Configuration
A building structure where the core containing elevator banks, emergency staircases,
plumbing, electricity, and HVAC are located on one side of the building allowing for an open area in the middle of
the floor and perhaps three sides for windowed offices.
Signs placed on the inside or outside of a building to advertise one's
A flat, horizontal reinforced concrete area, typically the interior floor of a
building but also an exterior or roof area.
Costs paid to professionals for services to improve a premises.
Concrete Stories' tool that calculates your total office area based on your selection
of offices, cubicles, conference rooms, reception areas, and other applicable areas, and taking into account all
add on factors.
The method by which the tenant pays the landlord for all utility charges. This
includes a markup for administration.
A clause in which the holder of a mortgagee permits a subsequent mortgagee to take
An agent of a person who is already acting as an agent for a principal. The original
agent can delegate authority to a subagent where such designation is either expressly authorized or customary in
A builder or contractor who enters into an agreement with a developer or the prime
contractor to execute a special portion of the construction work, such as electrical, plumbing, air-conditioning
installations, carpentry or cabinetwork.
A lease drawn between a tenant and a subtenant. This is another method of
transferring tenants rights under which the tenant's obligations to the landlord are not released.
The act or process by which a person’s rights or claims are ranked after those of
others; e.g. a second mortgagee’s rights are subordinate to those of the first mortgagee.
Additional rent charged to tenants who consume utility services (gas, water,
electric) in excess of the amounts permitted in the terms of the lease.
A reduction in the amount of real estate taxes obtained by the owner petitioning the
taxing authorities. The lease should provide for these benefits to be passed to the tenant.
Money or other financial inducement to a lessee that is provided by the Lessor to
cover the cost in whole or in part of preparing a structure for lessee’s occupancy.
An agreement, usually in the form of a letter, containing the basic material economic
terms to be incorporated into a lease agreement between the landlord and tenant.
Time is of the Essence
A contract clause that emphasizes timely performance as an essential requirement of
the contract. Thus, if any party to the instrument does not perform within the specified time period (the
“drop-dead” date), that party is in default, provided the non defaulting party has made a valid tender of
A document containing information from both the landlord and the tenant to easily record the negotiation process
until a final lease agreement is met.
A net-net-net lease where, in addition to the stipulated rent, the lessee assumes payment of all expenses
associated with the operation of the property. This contains both fixed expenses, such as taxes and insurance, and
all operating expenses, including costs of maintenance and repair.
The rate at which tenants move in and out of a rental building. A high turnover rate results in added expenses to
Type of Use
The manner for which commercial space will be used; for example: retail, office or industrial.
Strong enough persuasion to completely overpower the free will of another and prevent
him or her from performing intelligently and voluntary.
Unfinished Office Space
Space in a “shell” condition excluding dividing walls, ceiling, lighting,
air-conditioning, floor covering and the like. In leasing raw office space, the landlord often provides the
building with standard items and/or a construction allowance.
On a multi-tenancy floor, the gross area minus core space. Core space includes the
square footage used for public corridors, stairwells, washrooms, elevators, electrical and janitorial closets, and
fan rooms. On a single-tenant floor, the usable area is the gross square footage excluding building lobby and all
penetrating shafts (i.e. ducts, stairwells and elevators).
Usable Square Feet
Rentable Square Footage less the loss factor. (i.e., core and common area)
An allowance or discount for estimated vacancies (unrented units) in a rental
project. The vacancy and loss in rent factor is important in assembling an investment income analysis of a
property, such as an apartment building.
The equitable lien of the grantor on the land conveyed, in the amount of the unpaid
purchase price. Unlike a mortgage, it is not an absolute interest in the property, but is only an equitable right
to rely on in case all of the purchase money is not paid.
Wear and Tear
The gradual physical deterioration of property, resulting from use, passage of time
and from weather. Only property subject to wear and tear is eligible for cost recovery. Generally, a tenant must
return the leased premises to the landlord in good condition, ordinary wear and tear excepted.
The contribution made by the landlord toward the cost of the tenant installation
which may be provided in dollars, in labor and materials or in other landlord concessions.
Industry slang for lease expiration date.
A periodic tenancy in which the rent is reserved from year to year. Where the tenant
holds over after the first year, he or she normally creates another year-to-year tenancy.
The return on an investment or the amount of profit, stated as a percentage of the
amount invested; the rate of return.
The regulation of structures and uses of property within designated districts or
zones. Zoning regulates and affects such things as use of the land, lot sizes, types of structures permitted,
building heights, total floor area of a building, setbacks and density (the ratioof land area to improvement