Commercial real estate transactions can be daunting if not prepared, but going in with a base knowledge of the common terminology and most commonly asked questions can help you feel equipped and ready to make a decision. These are some of the most commonly asked questions answered by a certified commercial real estate broker!
Who are the players in the game?
There is the landlord side and the tenant side. A landlord has a representative who is a licensed real estate agent. Then on the other side of it, a person or company looking for a commercial space will generally have its own tenant representative as well. Occasionally, landlord representatives will do direct sales with possible future tenants.
What is TI and how does it work?
Tenant Improvements are changes/updates to a space that the tenants pay for. However, it can be credited back from the landlord depending on negotiations made prior to the improvements.
What is CAP rate?
Capitalization Rate is the return on investment you get from something, generally a building and/or property.
What is a COMP?
Comp stands for comparable properties. By comparing properties similar to the one in question, you are able to better price it.
How does square footage pricing work?
If a building is $10 per sqft that means it costs 10$ per sqft a year. You would then multiply the square footage by the sqft price to find out your total yearly rent. After that, you can divide by 12 to achieve your monthly rent cost. An example of this would be 1,000 sqft at $10 a sqft (1,000 sqft x $10 = 10,000). 10,000/12 comes to $833.32 a month.
What is CAM?
Common Area Maintenance (CAM) includes the recoverable maintenance expenses in a building. Buildings typically charge back tenants on different rental structures which can include CAM in the form of plus + Electric, a base year expense stop, full-service rates, or Triple Net.
Where do you see the market going right now?
It’s common for a commercial real estate broker to be asked whether markets are expected to move up or down soon. This information is essential to a tenant because it ultimately determines whether the lease terms are more favorable to the tenant or landlord relative to current market conditions. So, don’t hesitate to ask your broker this question and have them explain to you how the market is doing right now and what predictions there are for the future!
We hope these answers to some of the most commonly asked commercial real estate questions help you feel prepared when discussing an office space to lease for your company. If you are looking to lease a commercial space or are a commercial property owner who would like to work with an honest, upfront, and experienced commercial real estate firm, then please don’t hesitate to contact us or browse our full list of available properties.
