Commercial Real Estate Terms Exam
Questions With All Correct Answers -
Solved A+ Pass
Absorption Rate - Answers -✔✔ The estimate of the rate at which commercial office,
warehouse or industrial space will be leased or occupied in a given market within a
specified period.
Allowance - Answers -✔✔ A set dollar amount provided by the Landlord under a lease
to be used by the Tenant for a specific purpose. Examples include allowances for tenant
improvements, moving expenses design fees, etc. If the expense exceeds the
allowance amount, such excess is the Tenant's responsibility. If the expense is less
than the allowance, the savings are retained by the Landlord unless their agreement
specifies otherwise.
Amortization - Answers -✔✔ The process of paying off a debt together with interest,
usually with equal payments at regular intervals over a period of time.
Assessment - Answers -✔✔ A fee imposed on property, usually to pay for public
improvements such as water, sewers, streets, improvement districts, etc.
Absolute Net - Answers -✔✔ Lease requiring tenant to pay in addition to base rent all
costs associated with the operation, repair and maintenance of the building, all real
estate taxes, and utilities including repair and maintenance of the building's structure
and rood. Often the tenant is directly responsible both for all such costs and for the
active handling of the items themselves.
Assignment - Answers -✔✔ An agreement conveying the leasehold interests, including
the financial responsibilities, from one tenant to another tenant.
Base Rent - Answers -✔✔ The amount of rent to be paid by the tenant excluding
operating costs maintenance, insurance, hydro etc. Base rent is synonymous with
minimum, net or basic rent.
Base Building - Answers -✔✔ The existing shell of a building prior to tenant
improvements. This condition varies from building to building.
Betterment - Answers -✔✔ An improvement that increases property value as
distinguished from repairs or replacements that simply maintain value.
BOMA - Answers -✔✔ (Building Owners and Management Association) A national
association developed as a forum for building owners and managers and developers.
, Bona Fide - Answers -✔✔ In good faith, without fraud.
Build Out - Answers -✔✔ The construction or improvements of the interior of a
commercial space, including walls, flooring, plumbing, electrical, paint, etc.
Build-to-Suit - Answers -✔✔ The construction of an office or industrial building to meet
the specific requirements of a large tenant or purchaser.
Common Area Maintenance (CAM) - Answers -✔✔ The amount of additional rent
charged to the tenant to maintain the common areas of an industrial, commercial or
office building or property. These charges are shared by the tenants on a pro-rata basis
(ie. Landscaping, parking lot repairs, common area lighting, etc...)
Capital Improvements - Answers -✔✔ Improvements made by the landlord or owner of
building or site that potentially increases the value of the asset. Capital Improvements
should not be included in a buildings operating expenses.
Capitalization Rate ("Cap" Rate) - Answers -✔✔ The rate typically used to calculate or
make an estimate on the underlying value of a property based on the Net Income
derived from the property.
Formula: Net Income divided by Cap Rate = Estimated Value.
Concession - Answers -✔✔ Benefits granted by the landlord or owner to entice a new
tenant to lease premises or an existing tenant to remain within their premises. Common
concessions include free rent, lower rent, cash, cash for improvement work, moving
expenses and any other item agreeable to both parties.
Common Area - Answers -✔✔ An area of an office or industrial building that is used in
common by tenants and their visitors and generally include areas such as lobbies,
corridors, restrooms etc. This term can also be extended to include the cost of
maintaining parking areas, sidewalks, landscaped areas, public washrooms, loading
facilities and often form part of the tenant's pro-rata share of the buildings operating
expenses.
Contiguous Space - Answers -✔✔ Space that is adjacent to another space or series of
spaces. May also be used in describing space that is on a floor either directly above or
directly below the vacant space in an office or industrial complex.
Core Factor - Answers -✔✔ The percentage of net rentable square feet of a building
devoted to common areas, such as washrooms, hallways, lobbies, etc. Calculated as
rentable square footage divided by the usable square footage. Also known as R/U factor
or loss factor.
Questions With All Correct Answers -
Solved A+ Pass
Absorption Rate - Answers -✔✔ The estimate of the rate at which commercial office,
warehouse or industrial space will be leased or occupied in a given market within a
specified period.
Allowance - Answers -✔✔ A set dollar amount provided by the Landlord under a lease
to be used by the Tenant for a specific purpose. Examples include allowances for tenant
improvements, moving expenses design fees, etc. If the expense exceeds the
allowance amount, such excess is the Tenant's responsibility. If the expense is less
than the allowance, the savings are retained by the Landlord unless their agreement
specifies otherwise.
Amortization - Answers -✔✔ The process of paying off a debt together with interest,
usually with equal payments at regular intervals over a period of time.
Assessment - Answers -✔✔ A fee imposed on property, usually to pay for public
improvements such as water, sewers, streets, improvement districts, etc.
Absolute Net - Answers -✔✔ Lease requiring tenant to pay in addition to base rent all
costs associated with the operation, repair and maintenance of the building, all real
estate taxes, and utilities including repair and maintenance of the building's structure
and rood. Often the tenant is directly responsible both for all such costs and for the
active handling of the items themselves.
Assignment - Answers -✔✔ An agreement conveying the leasehold interests, including
the financial responsibilities, from one tenant to another tenant.
Base Rent - Answers -✔✔ The amount of rent to be paid by the tenant excluding
operating costs maintenance, insurance, hydro etc. Base rent is synonymous with
minimum, net or basic rent.
Base Building - Answers -✔✔ The existing shell of a building prior to tenant
improvements. This condition varies from building to building.
Betterment - Answers -✔✔ An improvement that increases property value as
distinguished from repairs or replacements that simply maintain value.
BOMA - Answers -✔✔ (Building Owners and Management Association) A national
association developed as a forum for building owners and managers and developers.
, Bona Fide - Answers -✔✔ In good faith, without fraud.
Build Out - Answers -✔✔ The construction or improvements of the interior of a
commercial space, including walls, flooring, plumbing, electrical, paint, etc.
Build-to-Suit - Answers -✔✔ The construction of an office or industrial building to meet
the specific requirements of a large tenant or purchaser.
Common Area Maintenance (CAM) - Answers -✔✔ The amount of additional rent
charged to the tenant to maintain the common areas of an industrial, commercial or
office building or property. These charges are shared by the tenants on a pro-rata basis
(ie. Landscaping, parking lot repairs, common area lighting, etc...)
Capital Improvements - Answers -✔✔ Improvements made by the landlord or owner of
building or site that potentially increases the value of the asset. Capital Improvements
should not be included in a buildings operating expenses.
Capitalization Rate ("Cap" Rate) - Answers -✔✔ The rate typically used to calculate or
make an estimate on the underlying value of a property based on the Net Income
derived from the property.
Formula: Net Income divided by Cap Rate = Estimated Value.
Concession - Answers -✔✔ Benefits granted by the landlord or owner to entice a new
tenant to lease premises or an existing tenant to remain within their premises. Common
concessions include free rent, lower rent, cash, cash for improvement work, moving
expenses and any other item agreeable to both parties.
Common Area - Answers -✔✔ An area of an office or industrial building that is used in
common by tenants and their visitors and generally include areas such as lobbies,
corridors, restrooms etc. This term can also be extended to include the cost of
maintaining parking areas, sidewalks, landscaped areas, public washrooms, loading
facilities and often form part of the tenant's pro-rata share of the buildings operating
expenses.
Contiguous Space - Answers -✔✔ Space that is adjacent to another space or series of
spaces. May also be used in describing space that is on a floor either directly above or
directly below the vacant space in an office or industrial complex.
Core Factor - Answers -✔✔ The percentage of net rentable square feet of a building
devoted to common areas, such as washrooms, hallways, lobbies, etc. Calculated as
rentable square footage divided by the usable square footage. Also known as R/U factor
or loss factor.
