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Glossary of Commercial Real Estate Terms

The best glossary of commercial real estate terms in the world. Period.

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Commercial Real Estate Terms

O
Term Definition
Occupancy Cost

The total cost to the tenant to occupy their premises.  

Offer to Lease

Otherwise known as a letter of intent in commercial real estate leasing. An offer to lease is a miniature version of the lease, outlining salient business terms the landlord and tenant agreed to prior to signing the lease.  It is typically a firm commitment on both parties once conditions have been waived.  

Office Percentage

The proportion of an industrial building's square footage that is office space.  Most industrial buildings are 5-10% office space.  Large distribution centers (over 100,000 square feet) are typically less than 3%.  

Operating Costs

A portion of the additional rent.  The costs to operate a building (maintenance, repair, management fees, insurance, etc.), and typically excluding realty taxes.   

Option to Extend / Option to Renew

A tenant right to continue the lease in the leased premises for a specified time period.  Typically at market rents, though a pre-negotiated amount can be stipulated in the lease.  Tenants typically have a 6-12 month time period before the expiry to trigger the right.  No other incentives are included in the renewal right, such as free rent periods or tenant allowances.  

Overage

A tenant in a retail lease paying a percentage of their gross sales to a landlord (in addition to the base rent).  For example, 8% of any sales in excess of $12,000 monthly.  See also Percentage Lease.  

Overholding

See also holding over.  A month to month tenancy agreement after the expiry of a lease with the landlord's consent.  Typically at 150% - 200% of the net rent payable in the last month of the term.  

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