Glossary of Rental Terms
The major or prime tenant in a commercial property.
A set amount used as a minimum rent in a lease with provisions for increasing the rent over the term of the lease.
Building classifications in most markets refer to Class "A", "B", "C" and sometimes "D" properties. Class "A", "AA", "AAA" properties are typically newer buildings with superior construction and finish in excellent locations with easy access, attractive to credit tenants, and which offer a multitude of amenities such as on-site management or covered parking. These buildings command the highest rental rates in their sub-market. As the "Class" of the building decreases (i.e. Class "B", "C" or "D") one building component or another becomes less desirable.
The space improvements put in place to meet a tenant's specifications.
A new building which is designed, constructed and leased to meet the needs of a major tenant, thereby minimizing leasing risk.
Central Business Districts
Class A Office Property:
A term used to describe a modern and superior quality office building with state-of-the art mechanical, electrical and life safety systems and high quality interior and exterior finishes. These prestigious office buildings typically have a strong market presence and attract city's premier tenants.
Those areas within a building that are available for common use by all tenants or groups of tenants (i.e. lobbies, corridors, restrooms, etc.). The cost of maintaining parking facilities, sidewalks, landscaped areas, public toilets, truck and service facilities, are included in the term "common area" when calculating the tenant's pro-rata share of building operating expenses.
Gross Leasable Area ("GLA"):
Refers to the total area within an office property that is available for lease to tenants and upon which tenants pay rent. A property's GLA is usually expressed in square feet.
A lease in which the tenant pays a flat sum for rent, out of which, the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc.
Gross Rental Rate:
Is comprised of two components: net rent and "additional rent" (realty taxes and operating costs). Typically, the net rental rate is fixed for a period, while the "additional rent" is subject to change as it is based on actual costs incurred to operate the property.
The acronym for "Heating, Ventilating and Air-Conditioning".
An agreement in which the owner of a property (i.e., landlord/lessor) gives the right of possession to a tenant/lessee for a specified period of time (i.e., term) and for a specified rent.
A legal document which sets forth the terms of a lease agreement between a landlord and tenant.
Long Term Lease:
In most markets, this refers to a lease whose term is at least three years from initial signing until the date of expiration or renewal option. Leases in supply-constrained markets such as New York or Toronto are generally 10 years or more.
A building or number of buildings joined together through the use of common areas and common access. Usually located in the core area of a city, a mixed use property may include an office, parking facility and significant retail component. A mixed-use property may also include a hotel complex or a residential component.
The square feet leased in a specific geographic area over a fixed period-of-time after deducting space vacated in the same area during the same period.
A lease in which there is a provision for the tenant to pay, in addition to rent, certain costs associated with the operation of the property. These costs may include property taxes, insurance, repairs, utilities, and maintenance.
Net Rentable Area:
The floor area of a building that remains after the square footage represented by vertical penetrations, such as elevator shafts, etc., has been deducted. Common areas and mechanical rooms are included and there are no deductions made for necessary columns and projections of the building.
An acronym for Real Estate Investment Trust, which represents a form of property ownership, in which no corporate income taxes are paid provided the REIT meets certain requirements. REIT's, which are available in Canada and the United States, originated in the United States and enjoy different tax treatments and legal status in both countries.
Step-Up Rental Rate:
A lease specifying predetermined increases in rent at set intervals during the term of the lease.
One who rents real estate from another and holds an estate by virtue of a lease.
Physical improvements to a tenant's space that may be paid for by the landlord or the tenant.
An incentive offered to a tenant by a landlord which effectively reduces the cost of occupancy. Tenant inducements may include: periods of free rent, moving expenses, construction allowances, cash payments, etc.
A measure of the total unoccupied space within a property expressed as a percentage of total leasable area. It is the complement to Occupancy Rate.
Existing tenant space which can be marketed for lease. This excludes space available for sublease.