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Glossary of Commercial Real Estate Terms

CAM: Common Area Maintenance

Gross Rent: The rental rate includes operating expenses. Opposite of a net lease

HVAC: Heating, Ventilation, Air Conditioning (generally encompassing a system).

Lessee: The tenant to whom a lease is given in return for rent payment.

Lessor: The landlord, usually the owner, who gives the lease in return for rent payment.

Letter of Intent (LOI): A written statement that two parties to a prospective transaction (buyer/seller or lessor/lessee) intend to proceed to a final agreement in good faith on stated principal business terms of the deal to be entered into.

Load Factor: The multiplier to a tenant's useable space that accounts for a proportionate share of the common area.

Operating Expenses (OpEx): The cost of operating a building, which typically includes CAM, taxes and insurance.

Net Absorption: The change in occupied square feet from one period to the next.

Net lease: Base rent excludes operating expenses and taxes for the property, including utilities, insurance and/or maintenance expenses (CAM), which are typically charged as additional rent or paid directly by the tenant. Opposite of a gross lease.

Net Rentable Area: The gross building square footage minus the elevator core, flues, pipe shafts, vertical ducts, balconies, and stairwell areas.

Sublease: The lessor is the lessee of a prior lease of the same space or property.

Tenant Improvements (TI): Improvements to the space or property to meet the needs of a tenant, such as remodeling. Depending on the specific lease agreement, TI is paid for by the landlord or tenant, or a combination of both.

Triple Net (NNN): A lease requiring the tenant to pay for the property’s operating expenses such as taxes, insurance, maintenance, utilities, cleaning etc. in addition to a fixed base rent.

Useable Area: The square footage occupied exclusively by a tenant. The useable area times the load factor for common area is the rentable area the lease rate is charged on.

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