Commercial Real Estate Terminology

dictionaryLike every industry, commercial real estate has a language of its own.  Let’s run through some of the key terminology you must know and understand when plotting your real estate strategy.

Blend and Extend: A strategy where tenants trade early renewal and extended lease length for more favorable lease terms.  For more information, read “What is a ‘Blend and Extend’?

Build-Out: Refers to the construction of the tenant’s proposed space to make it ready for occupancy.  Also referred to as TI or tenant improvements.  For more information, read “How do I Negotiate the Tenant Improvement Allowance?”

Building Class (A, B, C): Building classification may rate how the building is generally accepted in the market, or could be a personal classification by the individual referring to that structure.  Buildings are usually referred to as Class A, Class B, or Class C.  For more information, read “What’s the Difference Between Class A, Class B, and Class C Office Space?

First Right of Refusal: A right given to the tenant stating that before the landlord will lease the space in question (usually expansion space), the tenant will be given the right to lease it first.  The first right of refusal is usually negotiated into the lease and is typically governed by an agreed upon time limit.  For more information, read “Negotiating the Renewal Option.”

Rentable Square Footage vs Usable Square Footage: Rentable Square footage is the amount of space the tenant will pay rent on.  It includes the space inside the tenant’s suite plus a factor to account for the tenant’s use of common area.  Rentable Square Feet is always larger or equal to Usable Square Feet.  Usable Square Feet equals the amount of square feet measured within the confines of the tenant’s space – this does not include common area space.  For more information, read “Rentable Square Feet vs. Useable Square Feet.”

Site Selection: Indicates the practice of new facility location. Site selection involves measuring the needs of a new project against the merits of potential locations.  For more information, read “Rent is NOT the Only Factor to Consider in Your Site Selection.”

Sublease: A lease of a property or space by a tenant to a subtenant.  For more information, read “Pros and Cons of Subleasing Your Office from Another Tenant.”

Tenant Improvement Allowance: This is the amount of money the landlord is willing to contribute for the build-out of the tenant’s space.  It is usually quoted as “x” amount of dollars per rentable or usable square feet.  For more information, read “How Do I Negotiate the Tenant Improvement Allowance?

Whatever question you have about commercial real estate, chances are it can be answered by your tenant representation commercial real estate broker.  For more on the benefits of tenant representation, click here.  For more information about planning an office relocation, click here or contact Troy Golden at or (630) 805-2463.


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