What is commercial real estate?

Commercial real estate is loosely defined as any property owned to produce income. The six primary categories of commercial property are office, industrial, retail, land, multi-family, and miscellaneous, which includes everything else from hotels and hospitals to theaters and sports stadiums.

What is a commercial real estate broker?

A commercial real estate broker is a licensed real estate professional that acts as an intermediary between a buyer and seller of commercial property.

What is the difference between a listing agent and tenant/buyer representative?

A listing agent is hired by a property owner and represents a landlord or seller. A tenant/buyer representative is hired to represent the individual seeking to acquire property, whether through leasing or purchasing.

How do I find the right commercial real estate broker for me?

When you are looking for the right commercial real estate broker, you should fully evaluate their experience in your specific market and property type. Speaking with a broker's past and present clients is an insightful way to determine what it might be like to actually work with them. When you decide to hire a commercial real estate broker, you should feel confident that they understand and are capable of fulfilling your needs.

How is a commercial real estate broker compensated?

A percentage of the real estate transaction is typically paid by the owner of the property when the exchange is complete. The commission is then distributed between the buyer/tenant's representative and listing agent. This means there isn't a cost for a tenant to hire a broker, and the cost of using a listing agent for a buyer can be built into the sell/lease price.

What information do I need to provide to my commercial real estate broker to get started?

A great client doesn't need to know anything about real estate if they understand their business. The right commercial real estate broker will walk you through several questions that establish the fundamental requirements to meet your needs.

What is a gross lease?

A gross lease is a term used for a lease where the property owner/landlord assumes the operating expenses, which means more controlled and predictable costs for the tenant.

What is a triple net lease or NNN?

A triple net lease refers to a lease in which the three primary expenses, taxes, insurance, and common area maintenance, are distributed between the tenants of a property.

What is the difference between a rent commencement date and a lease commencement date?

The lease commencement date is the date in which a lease effectively binds the parties to the terms of a lease in a legal capacity. The rent commencement date is the date in which the tenant begins to pay rent to the tenant. Neither the rent or lease commencement date necessarily represent the date the tenant can move into the commercial property.

What is the difference between rentable square feet and usable square feet?

Usable square footage is the actual space, wall to wall, that is occupied by the tenant. If a tenant leases an entire floor, the usable square footage would include hallways and restrooms that exclusively serve that floor. Rentable square footage consists of usable square footage in addition to a portion of a property's shared space. Shared space may be anything outside of the occupied space that is a benefit to the tenant, but not exclusive to the tenant.

How does tenant improvement allowance work?

Tenant improvement allowance, or TIA, is the amount of money a property owner is willing to spend so a tenant may renovate commercial property. The allowance is typically expressed in as per-square-foot or as a total dollar sum, and is decided upon when a lease is being negotiated.

What is a right of first refusal?

A right of first refusal is a contractual right granted by the owner of a property, in which a tenant is given the opportunity to enter into a transaction with the owner according to specified terms, before the owner can enter in a transaction with any other party. This means if an owner of a building wants to sell their property, the tenant has the first opportunity to purchase it.

What can I do if I'm already in a lease but need to build-out or down-size?

If you are already in a lease but find that the terms are no longer suitable, you should contact an experienced tenant representative to renegotiate on your behalf.

What is an escalation cause?

An escalation clause determines how much a tenant's rent may increase and over what period of time. This allows landlords to enter in longer-term agreements that account for changes in the market, and ensures tenants have a predetermined range of how their expenses may fluctuate.

What if I find commercial property on my own I would like to learn more about?

Commercial real estate brokers have access to a large variety of resources to gain information about a property that may not be immediately or easily accessible to the general market. If you locate a commercial property you are interested in learning more about, you should contact a commercial real estate agent to inquire more.

How can I get an estimate of what a commercial real estate property is worth?

The best way to estimate the value of your commercial property is to get in touch with a commercial real estate agent that has access to the appropriate data and market research necessary to evaluate any commercial property.

What is a letter of intent?

A letter of intent typically reflects a serious desire and commitment to purchase commercial real estate property. When several buyers are competing for one property, an LOI can be used to draw favor from a seller by documenting the reputation and qualifications of the buyer. A letter of intent is not a legally binding purchase agreement.

We are not attorneys and do not offer legal advice. If you need any form of legal consulting, please contact a reputable attorney.

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