A Real Estate Dictionary
These definitions are not considered legal terms but give an overview of certain expressions which are incorporated into the leasing process, lease negotiations and ultimately lease documentation.
Click on each category to see a list of terms
Area / Space
Usable Area
Office area actually occupied by a Tenant for its sole and exclusive use
Rentable Area
Rentable area includes the usable area plus a pro rata portion of all common areas in the entire building excluding vertical shafts, such as elevators, stairs, mechanical risers, etc.
Common Areas
Common areas are those portions of the building which serve all office areas. Common areas include corridors, restrooms, public lobbies, and in some buildings, mechanical space, loading docks, and other service areas which benefit all Tenants
Load Factor
The amount of square footage added to a Tenants usable square footage, which represents Tenants pro rata share of the building's common areas. If a space has a load factor of 10% and 1000 usable square feet, then the rentable square feet would be 1100. The higher the load factor, the more space required.
BOMA Standard Measurement
A standard measurement. A specific defined way to measure space by the Building Owners and Managers Association. Landlords may choose their own more aggressive method.
Square ft per employee
Various office uses and configurations require different square feet per employee. This is a benchmark term for evaluating a building.
Efficiency
The percentage of rentable area, which is usable area, i.e a 90% efficient building offers 900 usable square feet for every 1000 rentable square feet.
Layout Efficiency
Efficiency of the usable area to meet Tenants' workflow requirements, office design, personnel etc. The higher the efficiency, the less square feet per employee is needed. Efficiency of usable area is dictated by building shape, core location, floor size, leasing depth, corridors, etc.
Building Definitions
Demising Walls
Those walls between one Tenants area and another as well as walls between Tenant areas and public corridors.
Partitioning
The divisions between offices, separate office suites, Tenants areas and corridors.
Floor Plate
A broker's buzz word for rentable floor size.
Building Module
Standard dimensions within leased areas dictated by spacing of window mullions or columns, i.e. a 5-foot module dictates offices in multiples of 5-feet dimensions.
Window Mullions
Those divisions on large windows which can accept Tenant partitioning to create offices.
Leasing Depth
The distance from the building window line to building corridor.
Zones
The identified portions of an office area served by the HVAC system which have separated thermostatic and temperature controls.
Smart Buildings
A building which has additional technical capabilities to provide enhanced building management and operating efficiency.
Shared Tenant Services
Services provided by a building to allow Tenants to share the costs and benefits of sophisticated telecommunications and other technical services.
Building Core
The “guts” of a building which normally includes building elevators, restrooms, smoke towers, fire stairs, mechanical shafts, janitorial closets, etc.
Center Core Building
A building in which elevators and service cores i.e. restrooms, mechanical shafts, etc. are located in the center of the floor plate.
Side Core Building
A building in which the elevators and service cores, are located on the side of the floorplate.
Offset Core
A building in which the core is located midway between each side and center.
Elevator Banks
A series of elevators which serve only certain floors in a building. A major building may have as many as 3 or 4 elevator banks serving the floors within the buildings.
Dropped Ceiling
A suspended ceiling attached to the underside floor above.
Core Drilling
A method of drilling holes in concrete floors and ceilings to allow utility installation.
Under Floor Duct System
A system of ducts permanently located in floors to assist in the installation of telephone and electrical wiring.
Rental & Expense
Rent
The cost charged per rentable square foot on a monthly or annual basis for a leased area. The rental rate may or may not include services or operating expenses paid by Landlord and should be specifically defined as to which party is responsible for services and costs.
Base Rent
The first year's rental rate, normally identified as the annual rent.
Base Year
A specific year of a lease against which increased operating expense reimbursements to Landlord may be calculated
Expense Stop
An identified dollar amount on a dollar per square foot per year basis that the Landlord is responsible to pay. Any increase of the expense stop will be allocated to the Tenant.
Full Service
A rental rate that includes normal building standard services, taxes and insurance, as provided by the Landlord within the base year rental.
Industrial Gross
A rental rate that includes some base year services to be provide by Landlord; normally the Tenant is responsible for cost of janitorial and utility services, and a share of common area maintenance.
Triple Net
A lease in which the Tenant is responsible for every and all expenses associated with their proportionate share of occupancy of the building.
Projected Operating Expense Escalation
A “good faith” estimate by the owner as to current operating expense increases over a base year, which is billed to the Tenant as additional rent. At year end there is an adjustment to actual increases. Tenants should have rights to review and challenge.
Direct Charge of Operating Expenses
On a net lease where the Tenant does not pay costs directly, the Landlord directly bills Tenants for pro rata share of occupancy costs.
Pro Rata Share
The ratio between the Tenants percent of occupancy of the rentable square footage of the building and the entire building rentable area. Used to determine Tenants share of increased expenses.
Ownership Costs
The cost to the owner to own the building or service existing debt (if any). Also included would be costs of capital improvements, which would not be considered standard operating costs such as code compliance, leasing costs, etc. These costs should not be a Tenant cost.
Operating Expenses
Those expenses necessary for the day-to-day operation of the building, which include normal maintenance, janitorial, utilities, management, security, etc. Careful attention should be given to ensure expenses are appropriate and reasonable.
Security Deposits
Tenants Dollars/credit enhancements to ensure Tenant performs under the terms of the lease. Portions of the deposit may be returned or released over the term of the lease.
Negotiating Terms
Free Rent
Period of time in which the Tenant occupies the premises under the lease but does not pay rent, and/or operating expenses.
Base Rental Escalation
Negotiated automatic increases in the base rental over the term of the lease, either as a fixed dollar amount or a fixed percentage increase.
Rental Increase/ Rental Review
Formula changes in the base rent during the term of the lease. Not to be confused with operating expense recapture increase or expense billings, usually tied to “fair market”.
Face Rate (contract Rate)
The identified rental rate in a lease which is subsequently discounted by concessions offered by the Landlord, also known as contract rate.
Effective Rent
The dollar per square foot per year figure which the Tenant pays on average over the term of the lease. This would be the average of specified rents in a stair stepped lease as well as the average of a lease with substantial free rent period. Example: a 5-year lease with 6 months free rent offers a 10% discount on the face rate.
Concessions
Those additional inducements offered by a Landlord to a Tenant to sign a lease. Common concessions are free rent, payment of moving costs, lease pick-ups, lease buyouts and extra Tenant improvement allowances.
Lease Pickup
Landlords commitment to pay a Tenant’s rent in premises to be vacated which are still under lease.
Lease Buyout
A cash inducement offered by a Landlord to Tenants current Landlord to cancel the remaining term of Tenants lease.
Sublease
Leasing of premises by the Tenant to another party for all or part of the remaining balance of an existing lease term.
Assignment
Transfer of the entire leasehold interest to a third party. This is different from a sublease whereas the existing Tenant remains in a primary position, in this situation the assignor is in a secondary position.
Moving allowance
An offer by a landlord to pay all or part of Tenants moving costs.
Fair Market Value
The rental value of space similar to the leased premises for comparison purposes in rental adjustments. This definition should reflect market conditions at the time of comparison and should be clearly defined.
Pre-Lease
Leasing of premises in a building under construction which is not yet ready for occupancy.
Improvements & Allowances
Tenant Improvements/Building Standards
Standard building materials and quantities as identified by the landlord, which are to be provided at no cost to the Tenant to improve Tenant premises. Normally included are partitioning, doors, walls, hardware, ceiling, lighting, window and floor coverings, telephone and electrical outlets and HVAC.
Landlord Work Letter
A document that delineates the type and quantities to be furnished by the Landlord as building standard. Defines Landlords responsibilities, scope of work and delivery of premises prior to expenditures of Tenant improvement allowances.
Base Building
Description outlining the condition of the premises to be delivered by Landlord. Normally applies to new construction or renovation and should include structural description, code compliance issues, building systems and all items and work to be provided by Landlord at no cost to Tenant. Tenant improvements commence above base building.
Shell Delivery (Cold Shell)
Normally associated with new construction, shell delivery does not include much Landlord installation. The tenant is responsible for improving the shell to Tenants requirements. In some instances, this includes the installation of, or paying for, improvements which are normally associated with Landlord work, such as bathrooms, elevator lobbies, electrical systems, ceilings, code work, etc.
Warm Shell
Shell delivery including some basic Landlord work such as bathrooms, installation of mechanical and electrical systems for distribution by Tenant, finishing of columns and exterior walls, elevator lobbies, etc.
Second Generation Space
Space that has been built to accommodate a former Tenant and is to be adapted by Landlord or the Tenant for the Tenants specified use.
Tenant Work Letter
Outlines scope of work and costs to be paid by Tenant.
Improvement Allowances
The estimated or dollar value of the building standard work letter being offered by the Landlord.
Above Building Standard
Materials not included in the work letter, which are subject to negotiation between the Landlord and Tenant.
Amortization of Tenant Improvements
An agreement on the part of the Landlord to pay for above-building standard improvements and amortize those improvements at a defined interest rate over a fixed term as additional rent.
Turnkey
A build-out of Tenant’s premises to the Tenants specifications
Substitution and Credits
The ability to substitute non-standard materials for Landlord-supplied materials as specified in the work letter, or to receive dollar amount credits for those materials not utilized.
Lay Out (Fit Plan)
A plan created by a space planner/ Architect showing locations of Tenant improvements and the utilization of the space by the Tenant.
Working Drawings or Constructions Documents
Drawings necessary to obtain a building permit and the construction of Tenant improvements.
Preliminary costing
A “rough quote” based on the space plan as to costs to build Tenant space.
Hard Costs
Actual costs for physical construction of Tenant improvements.
Soft Costs
Costs for plans, permits, fees, Architects, designers, etc. to prepare for Tenant improvements.
Code Compliance
Code Requirements
Building or occupancy use code requirements, which must be satisfied by either the Tenant or the Landlord in preparing space or building for Tenant occupancy. Included are seismic, life safety, energy, fire and handicapped code (ADA). Care should be given to identify who is responsible for costs.
Code Compliance Trigger
Certain costs, structural changes or other defined events, which necessitate the compliance of a building to current code. Tenants should be aware of any costs they may incur as a result of their lease.
Un-reinforced masonry building (UMB)
A building that does not meet current seismic code requirements.
Fire Corridors
Special corridors with partitioning designed to create escape routes in time of fire.
Fire Corridors/Exiting Requirements
Layout and exiting requirements, which limit space utilization and may make space unusable.
Life Safety
Government regulations and building code requirements for buildings relative to seismic, fire, handicapped and exiting requirements.
Compartmentalization
A code requirement to divide large floor plates into smaller units to meet fire code requirements.
Sprinklers
A fire suppression system designed into many buildings to avoid compartmentalization and provide additional fire protection.
ADA Requirements
Code required features designed to accommodate differently abled people. Included are entry ramps, restrooms, restroom fixtures, hardware, special doors, etc.
Fire Rated
Special building materials, such as partitioning and doors which have greater fire resistance than normal building standard materials.