11 MORE CRE TERMS & ACRONYMS TO KNOW: LEASING
Commercial real estate is a complex industry with numerous terms and acronyms that are crucial for tenants to understand when entering into lease agreements. At FCPG, we understand the importance of guiding our clients through the lease process, ensuring they have a comprehensive understanding of the terms and conditions they are agreeing to.
Our experienced Brokerage Team is well-versed in the intricacies of commercial real estate, enabling each broker to empower their clients with their extensive knowledge. Moreover, our collaborative team structure ensures that clients benefit from the collective expertise of the entire team.
If you’re looking to expand your knowledge of leasing-related terms and acronyms, we have 11 more valuable terms to share with you. These insights will further equip you to navigate the leasing process with confidence. And if you missed our previous list of CRE acronyms, be sure to check it out for additional industry terminology.
When you’re ready to take the next step and work with an expert broker who can help you achieve your commercial real estate goals, reach out to any of our brokers today. We are here to provide you with personalized guidance and support throughout your CRE journey.
11 Leasing CRE Terms & Acronyms to Know:
PSF (Per Square Foot): PSF refers to the measurement of cost or value per square foot of a property. It is commonly used in commercial real estate to indicate the price per square foot for leasing or purchasing a space. For example, if a property is listed at $20 PSF, it means the cost per square foot per year.
RFP (Request for Proposal): An RFP is a formal document issued by a buyer or tenant to solicit proposals from potential vendors or landlords. It outlines the requirements, specifications, and criteria for the project or lease. The RFP allows the buyer or tenant to evaluate and compare proposals from various parties before deciding which party to proceed into a deal with.
2nd Gen Space: Also referred to as “second generation space,” this refers to a commercial space that has been previously occupied by another tenant. It is ready for occupancy without significant modifications or build-outs, as it already has basic infrastructure and existing improvements from the previous tenant. This term is often used in leasing transactions to distinguish between spaces that require extensive renovations (1st Gen Space or shell space, see below) and those that are move-in ready.
Shell Space: Shell Space refers to a commercial property or unit that has a basic structure and infrastructure but lacks interior finishes, such as walls, flooring, ceilings, or electrical systems. It provides a blank canvas for tenants to customize and design the space according to their specific needs and requirements.
Sublease: A sublease occurs when the original tenant (sublessor) leases a portion or the entire leased space to another party (sublessee) for a specific period within the original lease term. The sublessor remains responsible to the landlord under the original lease, while the sublessee pays rent directly to the sublessor. Subleasing allows the original tenant to mitigate costs or utilize excess space.
Class A, B, C: Class A, B, and C are classifications used to categorize commercial properties, set by BOMA, based on their quality, location, amenities, and overall desirability in the market:
Class A: These properties are considered the highest quality and typically have the best locations, modern designs, excellent amenities, and high-end finishes. They attract high-profile tenants and command premium rents.
Class B: Class B properties are generally older or have some functional or aesthetic limitations compared to Class A properties. They offer competitive rents and may require some updates or renovations.
Class C: Class C properties are typically older, have outdated designs, and may require significant renovations. They tend to have lower rents and attract tenants looking for cost-effective options.
As-Is: As-Is refers to the condition of a property at the time of sale or lease, without any modifications or improvements made by the seller or landlord. When a property is sold or leased “as-is,” the buyer or tenant assumes responsibility for any repairs, maintenance, or upgrades needed.
TI (Tenant Improvements): Tenant Improvements, often referred to as TI, are modifications or improvements made to a commercial space to meet the specific needs and requirements of the tenant. This may include interior renovations, alterations to the layout, installation of fixtures, or customization of the space to accommodate the tenant’s business operations. Tenant Improvement Allowances (TIA) are often worked into the negotiations of a deal to result in landlord contribution to Tenant Improvements. This can be a per square foot allocation or a fixed sum, and are often reimbursed by the landlord following completion by the tenant.
Net, NN, NNN: These terms refer to different types of lease structures where the tenant assumes responsibility for additional expenses beyond the base rent:
Net Lease: In a Net Lease, the tenant pays the base rent plus a portion or all the property’s operating expenses, such as property taxes, insurance, and maintenance.
Double Net (NN) Lease: In a Double Net Lease, the tenant pays the base rent and contributes to property taxes and insurance. The landlord typically covers maintenance expenses.
Triple Net (NNN) Lease: In a Triple Net Lease, the tenant pays the base rent and is responsible for all property operating expenses, including property taxes, insurance, and maintenance.
Exclusives: Exclusives refer to rights granted to a tenant or landlord in a lease agreement that restricts certain activities or grants exclusive use of a particular space or service within a commercial property. For example, a retail tenant may have an exclusive clause preventing the landlord from leasing adjacent spaces to direct competitors.
BOV (Broker Opinion of Value): BOV, or Broker Opinion of Value, is a professional estimate provided by a real estate broker or agent that assesses the approximate market value of a property. It helps buyers, sellers, or lenders gauge the potential worth of a property based on the broker’s expertise and knowledge of the local market.
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