The document defines various real estate terms related to office space including: - Usable area and rentable area which impact the square footage a tenant pays for - Common areas and load factors which determine how much space is allocated to common areas - Operating expenses, base years, and pro rata shares which impact how costs are allocated to tenants - Tenant improvements, allowances, and concessions which impact the buildout costs for tenants

1. A Client Guide to
Real Estate Terms

2. A Client Guide to Real Estate Terms
colliers international | Baltimore | P. 2
USABLE AREA
(SQUARE FEET):
Office area actually occupied by a tenant for its sole and exclusive use. The usable area on a single
floor of a building may vary depending upon corridor configurations, whether the floor is for a single
tenant or multiple tenant occupancy, etc.
RENTABLE AREA
(SQUARE FEET):
The rentable area includes the usable area plus a pro rata share of common areas on the entire office
floor and in the building itself (e.g. main lobby) excluding vertical shafts, such as elevators, stairs,
mechanical risers, etc.
COMMON AREAS:
Common areas are those portions of the building used by all office tenants or 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/COMMON
AREA ALLOCATION:
That percentage of the building which is common area, allocated to the tenants to increase their usable
area to rentable area. A common area factor of ten percent (10%) means that 900 usable square feet
would be 990 rentable square feet.
LAYOUT EFFICIENCY:
Efficiency of the usable area to meet tenant’s requirements. Efficiency of usable area is dictated by such
factors as: building shape, core location, column size location, floor size, leasing depth, corridors, etc.
Area/Space Definitions

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RENT: The cost charged per rentable square foot, typically expressed on an annual basis forthe entire leased area.
BASE MINIMUM RENT: Usually the first year’s rental cost, normally identified as the annual rent in a gross lease.
COMMON AREAS:
Common areas are those portions of the building used by all office tenants or 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.
EXPENSE STOP:
An identified dollar amount, either on a dollar per square foot per year basis or a pro rata share basis of
total operating expense cost, that the landlord is responsible for paying. Any increase over the expense
“stop” will be passed through to the tenant.
GROSS RENT:
A rental rate that includes normal building services (e.g. utilities, janitorial, repairs, payroll, etc.) as
provided by the landlord within the base year rental.
MODIFIED GROSS RENT
(NET LEASE):
A rental rate that includes only certain services provided by landlord. The tenant is usually responsible
for cost of utilities and janitorial services.
NET NET NET RENT:
A lease in which the tenant is responsible for all expenses and real estate taxes associated with its
proportionate share of occupancy of the building.
OPERATING EXPENSES:
Those normal expenses associated with the operation of a standard office building, including, but not
limited to: utilities, janitorial service, consumable supplies, taxes, insurance, maintenance and repair,
etc. Ownership expenses, leasing and marketing costs, and capital repairs and/or replacements are
not operating expenses.
BASE YEAR:
The year of building operation, normally a calendar year, in which the landlord fixes or identifies the
operating costs which are included in a gross or semi-net lease.
Any increases in operating expenses over the base year are billed to the tenant on a pro rata share of
occupancy.
PRO RATA SHARE:
The ratio between the tenant’s percent of occupancy of its rentable square footage of the building to
the entire rentable area of the building.
Rental & Expense Definitions

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EXPENSE ALLOCATION:
The allocation of expenses (either in whole or above a base year or expense stop) to a tenant based
upon the tenant’s pro rata share.
RECAPTURE:
A term used to describe the billing to tenants of their pro rata share of increased operating expenses,
usually after those expenses have been incurred and paid for by the landlord.
PROJECTED/ESTIMATED
OPERATING EXPENSE
INCREASE:
A “good faith” estimate by the owner as to current operating expenses increases over a base year,
which are billed to the tenant as additional rent.
RENTAL COMPONENTS:
Three (3) basic rental components are:
Ownership Costs: The cost to the owner to own the building, servicing existing debt, receiving a
return on equity. Also included would be costs of capital improvements and repairs not considered
standard operating costs.
Operating Expenses and Real Estate Taxes: Those expenses and taxes necessary for the day-to-
day operation of the building that have not been outlined above.
Tenant Improvements or Tenant Allowances: The return amortized costs to the landlord, over
the term of the lease, of the landlord’s building standard TI work letter and any other costs which
landlord has agreed to assume or amortize for the tenant.
BASE YEAR:
The year of building operation, normally a calendar year, in which the landlord fixes or identifies the
operating costs which are included in a gross or semi-net lease.
Any increases in operating expenses over the base year are billed to the tenant on a pro rata share of
occupancy.

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FREE RENT
(RENTAL ABATEMENT):
Period of time during which the tenant occupies the premises but does not pay rent. Be careful to
determine if landlord will seek a reimbursement of expenses, or if those will be included in the free
rent.
FIXED INCREASE
TO RENT:
A rental rate which increases by fixed amounts during the period of the lease term.
CPI OR PERCENTAGE
INCREASE TO RENT:
Changes in the base rent during the term of the lease, including fixed percentages, C.P.I. increases, or
pre-set “bumps” in the rental rate at specified points in the lease term.
EFFECTIVE RENT:
The dollar per square foot per year, which the tenant actually 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
rent of a lease with substantial free rent period. Example: The effective rate of a five (5)-year lease
with six (6) months free rent is ten percent (10%) less than the face rent.
FACE RENT: The identified rental rate in a lease (also known as contract rate), as shown in the lease itself.
CONCESSIONS:
Inducements offered by a landlord to get a tenant to sign a lease. Common concessions are rent
abatement, extra tenant improvement dollars, payment of moving costs and assumption of an existing
lease obligation.
LEASE ASSUMPTION:
A new landlord’s commitment to pay the cost of a company’s lease to its prior landlord to facilitate
their moving into his project.
LEASE BUY-OUT:
A cash payment from a new landlord to a tenant’s previous landlord to cancel the remaining balance
of an existing lease term.
SUBLEASE: Leasing of premises by a tenant to another party for the balance of an existing lease term.
MOVING ALLOWANCE: An offer by a new landlord to pay all or part of tenant’s moving costs.
AIR MARKET VALUE:
The market rental value of space similar to the leased premises for comparison purposes, typically
used in determining rent for renewal terms.
PRE-LEASE: Leasing of premises in a building that is under construction and not yet ready for occupancy.
Rental Concessions

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BUILDING STANDARD
TENANT IMPROVEMENTS:
Building materials and quantities, as identified and specified by the landlord, provided as part of the
base rent to the tenant for improving the tenant’s premises. Normally included are partitioning, doors,
walls, hardware, ceiling, lighting, window and floor coverings, telephone and electrical outlets, and
HVAC (Heating, Ventilation and Air Conditioning systems), distribution ductwork and mixing boxes.
BUILDING STANDARD
WORK LETTER:
A document which delineates the type, quality and quantity of materials to be furnished by the landlord
as building standard.
SUPPLEMENTAL
WORK LETTER:
A document which would include the above plus any additional items to be paid for by the landlord or
by the tenant, with an indication as to who is responsible for each item.
IMPROVEMENT
ALLOWANCE:
The estimated actual dollar value (represented by a gross amount or an amount per square foot) of the
improvement allowance being offered by the landlord.
ABOVE BUILDING
STANDARD:
Materials not included in the work letter, and usually of greater quality or amount, which are subject to
negotiation between the landlord and tenant as to quality, quantity and payment.
AMORTIZATION OF
ADDITIONAL 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.
“TURN KEY”
A complete build-out of tenant’s premises pursuant to tenant’s specifications, usually at no additional
cost to the tenant.
SPACE PLAN:
A schematic plan created by a space planner / architect, showing locations of improvements, fixtures,
outlets, lights, etc. and the utilization of the space by the tenant.
WORKING DRAWINGS:
Detailed drawings required to obtain a building permit and to complete the construction of tenant
improvements. (Include architectural, mechanical, electrical, plumbing and reflected ceiling drawings).
Improvements and Allowances

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CODE REQUIREMENTS:
Building code requirements which must be satisfied by either the tenant or the landlord in preparing
space or building for tenant occupancy. Required codes usually address safety, electric, plumbing,
mechanical, energy, hazardous waste / toxic materials, and handicapped requirements.
LIFE SAFETY:
Government regulations and building code requirements relating to fire, handicapped and safety
requirements.
FIRE CORRIDORS:
Special corridors whose size, length, and height of partitioning are designed to create escape routes to
stairwells or exits during a fire.
SPRINKLERS:
A piped fire suppression system designed in buildings to avoid compartmentalization (division of large
floor areas into smaller areas) and to provide additional fire protection.
HANDICAPPED
REQUIREMENTS:
Code required features designed to accommodate handicapped persons, including 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 other
building standard materials.
Code Requirements

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DEMISING WALLS:
Those walls between one tenant’s area and another tenant, as well as walls between tenant
areas and public corridors, usually running from the floor through the ceiling to the underside
of the above slab.
PARTITIONING: The division between offices, separate office suites, tenant areas and corridors.
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-foot dimensions).
WINDOW MULLIONS:
Those divisions on, or in, exterior glass which subdivides windows and facilitates tenant
partitioning to create offices.
LEASING DEPTH: The distance from the building window line to the building corridor.
BUILDING CORE:
The “working insides” of a building, which normally include building elevators, restroom,
smoke towers, fire stairs, mechanical shafts, janitorial closets, etc.
CENTER CORE
BUILDINGS:
A building in which the elevators and service cores are located in the center of the floor.
SIDE CORE BUILDING:
A building in which the elevators and service cores (i.e. restroom, mechanical shafts, etc.) are
located on the side of the floor.
OFFSET CORE: A building in which the core is located midway between each side and center.
DROPPED CEILING: A suspended ceiling attached to the underside of the floor above.
CORE DRILLING:
A method of drilling holes in floors and ceilings to facilitate installation of telephone, computer
and electrical wiring.
UNDER FLOOR
DUCT SYSTEM:
A system of ducts permanently located in floors to assist in the installation of telephone and
electrical wiring for systems furniture (e.g. Walker duct system).
Building Definitions