Commercial Real Estate Glossary Pt. 1
Unlike residential real estate, commercial real estate involves longer contracts, higher prices, and complex terms. It’s important that you’re aware of the most important commercial real estate terms before diving into your first deal.
Commercial Real Estate Glossary
A
Agent
An individual/entity who transacts, represents, or manages business for another individual/entity. Permission is provided by the individual/entity being represented.
Anchor
A major tenant in a retail center.
As-Is / As-Built
The space will be leased exactly the way it is now, the landlord won’t fund any improvements.
Assignment Clause
An assignment clause may prevent or prohibit the tenant from transferring the entire interest away to another person. In an assignment situation, the person who receives the assignment will be responsible for rent until the end of the lease term.
Average Daily Rate (ADR)
The average revenue generated per paid occupied room per day, calculated by dividing room revenue by the number of rooms sold. The ADR is commonly used in the hospitality industry together with the RevPAR metric to assess the property’s performance.
B
Base Year
The base amount of operating expenses a tenant is expected to pay, usually the amount in the year that the lease is signed. Increases in operating expenses above the base year are passed through to tenants, based on their pro-rata share of a building.
Buildout
The amount of finish a space has including flooring, walls, finished plumbing, electrical work, etc.
C
Cap Rate
Also known as capitalization rate, which is the value given to the property when the Net Operating Income (NOI) is divided by the current market value or sales price. This rate helps a potential buyer determine the amount of return they will see for a given investment.
Certificate of Occupancy (CO)
A government-issued official form stating that the building is legally ready to be occupied.
Construction Documents
An all-encompassing term to describe the detailed documents such as all the necessary plans and blueprints to construct a tenant’s space or a building properly and accurately.
Contingencies
These are items that have to be met, changed, or remedied in order for a deal to close.
D
Deed
A signed, written instrument that conveys title to real property.
Divisible Minimum / Maximum
The smallest and largest sizes that a space can be made into. For example, a large space may be broken down into several smaller spaces to accommodate more users.
E
End Cap
Also known as end units, which are the stores at the corner of a strip mall type development. They often have two walls of glass instead of just one, providing greater visibility to customers.
Escalation clause
An escalation clause will explain the amount the rent will escalate or increase annually. The increase may be determined based upon the property taxes, operating expenses, or even the Consumer Price Index.
Escrow
A written agreement among parties, requiring that certain property/funds be placed with a third party. The object in escrow is released to a designated entity upon completion of some specific occurrence.
Keep up to date with information regarding property management and our commercial real estate glossary series on our realty blog.
At Jcorp Realty Inc., we specialize in full-service property management in Connecticut, Rhode Island, and Massachusetts, with several commercial properties for sale in the New England area. If you’re seeking a team of professionals who have experience with commercial real estate in Connecticut, look no further than the team at Jcorp Realty Inc. Contact us today.
