Tulsa Commercial Real Estate Experts: Commercial Real Estate Definitions
Tulsa Commercial Real Estate Experts: Commercial Real Estate Definitions
by U.S. SBA Entrepreneur of the Year & Cofounder of Fears & Clark Tulsa Commercial Real Estate Group – Clay Clark
Over the years, we commonly encounter people who are not familiar with the terms and the industry jargon routinely
used by brokers and realtors within the commercial real estate industry. To help bridge the gap in understanding and
to offer better clarify to those business owners out there that are unfamililar with the terms, we have put together
the following stockpile of definitions related to the commercial real estate industry.
The terms:
What does the term “base rent” mean? The term “base rent” is used to refer to the minimum amount of rent due under the
unique terms described in that particular lease which also requires the tenant to pay some additional rent based on a
total percentage or participation requirement.
This lease is very commonly used by the retail industry. Malls love to use this kind of lease. One example of this would
be as follows. There is a story called Mary’s Metal Emporium. Mary’s Metal Emporium is required to pay a base rent each and
every month in the amount of $2,200. However the lease does require that she also pay on top of the base rent a
small percent of all the transactions and gross sales that she makes each month over a certain amount of sales.
What does the term “double net lease” mean? The term “double net lease” is used to refer to a lease in which the tenant
pays all or part of the taxes due for the building and any insurance associated with the used of the actual real estate.
The total fees are paid on top of the monthly lease payments for the use of the actual commercial real estate space.
What does the term, “load factor” mean? The phrase and real estate term called “load factor” refers to the monthly rental
costs to the tenant that combine the actual space that can be used directly by the tenant’s business and a percentage
of the common areas that are shared by all the tenants. An example of this would be as follows. You office in a building.
In the building you used 4,200 square feet of commercial real estate space in your Tulsa office building. You never use
the elevator and you never personally used the downstairs restroom. Yet, with this type of lease, you are going to be
paying a little each month for it and hopefully you like it. Because whether you like it or not, you are going to
be paying for it.
This calculation of the additional percentage of the common area expenses to the monthly rental amounts is called the
“load factor.” Unrelated, yet funny…I once knew a guy who went by the nickname, “load factor.” Most often the common
areas may include restrooms, elevators, glamorous and non-glamorous stairwells, common hallyways, lobbies, parking garages,
basement areas, balconies, etc…
What does the term “triple net lease” mean? The term “triple net lease” is also known in the commercial real estate
industry as a NNN lease. Although nearly all business owners have no idea what this phrase means, people within the
commercial real estate industry love to use this term, like the Star Trekkies do when they go to those Las Vegas
Star Trek conventions. For some reason people love to use industry jargon when speaking to people who are not
from the industry. Anyway, back to the definition. The terms NNN lease is an actual type of net lease in which
the tenant will pay all or nearly all of the taxes, insurance and maintenance costs associated with the use of the
commercial real estate. These fees are then paid in additional to the actual monthly lease payment made by the tenant.
A triple net lease will nearly always work in the favor of the building owner, office building owner, commercial real
estate property owner, and landlord. This nearly always works out great for them, so tenants should proceed with
caution when negotiating the limit to how much the clever landlords can increase their NNN fees on an annual basis.
What does the term, “fully serviced lease” mean? The term “fully serviced lease” actually refers to a type of lease
in which the total monthly lease payments include the line items socsts of certain types of ammenities and services.
These services can include, but are not limited to the following service types: janitorial services, trash collection,
sewer charges, water charges, utilities, camera installation, security system monitoring, property taxes, etc…Nearly
all of these costs are not fun to pay for.
In this unique situation, instead of the tenant opening their own services and utility accounts and then making payments
directly for those costs, the landlord will pay all of the expenses, but they do then include an amount in the
monthly rental costs and charges to directly help pay for these incredible costs.
What does it mean to “sublease commercial real estate?” Subleasing commercial real estate can actually be much more
affordable than leasing out a large amount of real estate on your own as a lone wolf business owner and space occupier.
However, you still must truly sit down, look at all the numbers and analyze the types of subleases that are out there
so that you can property negotiate your sublease. It is also very important that you look out for yourself and that you
protect yourself as the sublessee.
So the question always then comes up. Can a subtenant sue a landord? If the master lease agrement did not actually
grant the tenant the specific right to go out and sublease the space, then you cannot sue the landlord. Before you
agree to sublease from anyone, you must make 100% sure that the master lease signed by the original tenant does
give them the right to sublease space to you.
For more information about subleasing, leasing, occupying, renting, buying, selling and investing in Tulsa commercial
real estate, call the expert Braxton Fears today.
by U.S. SBA Entrepreneur of the Year & Cofounder of Fears & Clark Tulsa Commercial Real Estate Group – Clay Clark
For more information about great Tulsa commercial Real Estate Properties visit www.FearsClark.com or
call us today at 918-481-2080.
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