- March 1, 2019
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Whether you’re buying, selling, or leasing commercial real estate, it’s important to enter into a potential transaction with some basic knowledge about how the commercial market works. Real estate speaks a different language, just like accounting, biochemical engineering, or any other specialized niche might. This means that the first step in truly understanding the process is learning some of the key terms that you’re likely to encounter along the way! We’ve put together a glossary of the more common words that you can expect to hear in an effort to make the process go much more smoothly.
In commercial real estate, the term amenity refers to any specialized feature that might contribute to a property’s value. This term will most commonly be heard when speaking of multifamily property. Communities may use pools, on-site laundry facilities, restaurants, fitness facilities, or high-end concierge services as advertising tools for their space.
If you’re looking at commercial real estate that’s being offered “as-is”, this means that you can expect that the landlord is not willing to make any further improvements to enhance the space prior to your move-in.
Contrarily, this term refers to the work that will need to be done to get a commercial property ready for use. This includes demolition, the building of individual offices, any repairs that need to be done, and installation of higher-end finishes, among others.
Commercial buildings are broken down into individual classifications (A, B, C) based on how desirable they are to potential tenants. A Class A building will likely offer a better location, higher-end finishes, upgraded wiring, and greater amenities, although there are no concrete factors that determine which classification a building falls into (it will vary from market to market). It will also cost more than other classifications.
Common Area Maintenance (CAM)
The common area of a commercial building is any space that is used by all of the tenants within the building, such as lobbies, stairwells, hallways, elevators, shared restrooms, et cetera. CAM refers to the upkeep required to keep these areas in good, working order. In most leasing situations, there will be an additional fee (on top of your base rent) to cover these costs.
In a commercial real estate lease, a landlord may offer discounts, called concessions, intended to sway a tenant to occupy their space. This might mean discounted rent, offering to pay moving expenses, or more.
This term refers to any stipulations that need to be met in order for a commercial real estate transaction to successfully close. Examples of this may be repairs to the building or furnishing proof of insurance.
Letter of Intent
Typically presented before an actual lease is signed, this document states that a space is under negotiation between two parties and puts forth the initial terms offered by the landlord. It is the basis for any future negotiations.
This is a percentage found by taking the rentable area of a commercial space and dividing it by the usable area.
A sublease is when a tenant gains the landlord’s permission to rent out all or a portion of their commercial space to a third party. In no way does this create any sort of contract between the landlord and the third party. Your lease will outline whether or not this is allowed and under what circumstances.
Tenant Improvement Allowance
This term refers to a lump sum offered in the lease by the landlord to the tenant so that they can improve the space for their own use.
The usable area of a commercial space refers to the actual size of an entire building (including any common areas). Rentable area, however, refers to the particular space being used by an individual company within the building.
When you’re looking for commercial real estate, it’s important to ensure that the properties you are looking at are properly zoned for the type of business you are running. How individual lots may be used is determined by various government departments.
Looking to Lease Commercial Real Estate in Baton Rouge or the Surrounding Area?
Now that you are more familiar with some of the common terms you will come across while you search for the perfect commercial property, it’s time to get your search started! At SVN | Graham, Langlois, & Legendre, LLC, we’re excited to help you find the right space and walk you through the leasing process from start to finish. Our trust team of Advisors will go above and beyond to make the entire journey fun and easy to understand. Take a look through our database of available properties today and reach out to one of our team members to begin!