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Commercial Real Estate Terms
| 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. |