Commercial Real Estate Glossary of Terms
A–C
Absorption Rate – The rate at which available commercial space is leased over time.
Base Rent – The minimum rent due, excluding additional fees.
Build-Out – Customizing a leased space to fit tenant needs.
Cap Rate (Capitalization Rate) – A property’s return on investment, calculated as NOI ÷ Property Value.
Commercial Mortgage – A loan secured for purchasing commercial properties.
Common Area Maintenance (CAM) Fees – Costs tenants pay for shared building spaces.
D–G
Due Diligence – Research and inspections conducted before finalizing a property deal.
Escalation Clause – A lease clause that allows rent increases over time.
Gross Lease – A lease where the landlord covers most operating expenses.
Ground Lease – A long-term lease (often 50+ years) where a tenant rents land to develop.
H–L
Holding Costs – Expenses an owner pays while a property remains vacant.
Lease Term – The length of time a lease is in effect.
Letter of Intent (LOI) – A preliminary, non-binding agreement outlining key lease/purchase terms.
M–P
Modified Gross Lease – A lease where expenses are split between landlord and tenant.
Net Lease – A lease where the tenant covers some/all property costs.
Net Operating Income (NOI) – Income minus operating expenses (excluding mortgage payments).
Parking Ratio – The number of parking spaces available per square footage of leased space.
Q–Z
Real Estate Investment Trust (REIT) – A company that owns/manages income-generating real estate.
Return on Investment (ROI) – The financial return from a commercial real estate investment.
Triple Net Lease (NNN Lease) – A lease where tenants pay taxes, insurance, and maintenance costs.
Vacancy Rate – The percentage of unoccupied rentable space in a market.
Zoning Ordinances – Local laws dictating how property can be used.
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