Commercial Lease Terminology You Need to Know Before Signing

Posted on October 22, 2021 by bafcorp20

Before signing on that dotted line, be sure you are clearly interpreting the commercial real estate leasing jargon on your contract. Continue below to review some of the most common commercial lease terms and definitions you need to know if you want to make an informed and intelligent decision on your new office or business space.

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Vocabulary Terms on a Commercial Office Lease

Understanding the terms and conditions of your commercial lease is quite difficult if you are not familiar with the standard terminology used within such contracts. It can be especially troublesome if you wish to amend or get out of your commercial lease at some point.

Some of the most common terms you will come across, on your standard commercial office lease that is, include common area maintenance, load factor, option to purchase, parking ratio, right of first refusal, rentable square footage, usable square footage, and request for proposal. Let’s start with these:

Common Area Maintenance

Common area maintenance (CAM) is a general term used to describe the stipulations surrounding shared maintenance expenses for the building you are leasing within. In a multi-unit building, each tenant may be required to contribute to such costs, which are typically decreed within the lease.

Load Factor

Load factor, or core factor, is a calculated number generated by the property management company or landlord of the building. This number represents the division of common area square footage among each tenant. This number allows you to interpret the value or fairness of your rentable square footage.

Option to Purchase

Option to purchase is a term typically reserved for leasing a whole building, not just a unit within a multi-tenant office building. Option to purchase is a section that will describe clauses for a tenant who wishes to buy the building outright one day. An Option to purchase agreement should take into account the amount of rent paid to date.

Parking Ratio

Parking ratio simple refers to the number of parking spaces allotted to the tenant’s rented space. For a multi-tenant office building, there could be a certain number of spaces assessed for employees and visitors.

Right of First Refusal

Commercial leases that have a Right of First Refusal clause gives tenants an upper hand when new space becomes available in the building. A landlord must notify you and offer you any newly available space before advertising it to the general public. Basically, you have first dibs, plus to right to refuse it.

Rentable Square Footage

Rentable square footage is the total square footage of the space you are leasing, plus any shared or communal spaces that other tenants use as well, such as outdoor break areas, hallways, break rooms, cafeterias, bathrooms, and elevators.

Usable Square Footage

Usable square footage is generally less than the rentable square footage. It represents the total square footage of the space that can actually be occupied and used. For instance, if an office space has a basement level that is unfinished, it is not usable, and therefore, would not be included in the usable square footage value.

Request for Proposal

A Request for proposal is also called an RFP document. This document is constructed by you and your broker, then submitted to the commercial landlord to notify them of what you expect and want with your leased space. The landlord can respond by informing you if their facility meets your needs or not. This document tends to commence the lease negotiating process.

Are you looking for help procuring and designing a new office space for your business? Contact BAF Corporation at 317-253-0531 to speak with our esteemed commercial construction management teams about our space planning and permitting solutions we offer in Central Indiana.

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Frequently Asked Questions About Commercial Interior Build Outs

Posted on August 27, 2020 by bafcorp20

Business and facility owners experience change as the years progress and the economy evolves. After so much time, many find themselves in need of a brick and mortar, new location, or new look. Either way, in comes the commercial interior build-out. Continue reading to review some of the most frequently asked questions about interior build-outs, including how they can benefit your business’s overall success and where to get started with a trusted bid in Indianapolis.

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Commercial Interior Build-Out FAQS

What is a Commercial Interior Build-Out?

A commercial interior build-out can mislead business owners since they are often referred to as commercial tenant improvements (TI’s) or leaseholder improvements. Commercial tenant improvements and remodels are generally needed in almost all cases of a business needing new space since most commercial offices and units are not set up to meet the exact needs of a particular company. In fact, this is exactly what a commercial interior build-out is: a commercial construction remodel to an existing space to customize it structurally and culturally to the business’s unique needs.

Do Tenants or Landlords Pay for a Commercial Interior Build Out?

There is always some confusion with who pays for what when it comes to commercial tenant improvements and remodels. Generally, the landlord and tenant can choose how they want to arrange the financial liability for a commercial interior build-out. Among the possible arrangements, examples include:

✒ Rent Concessions – Landlord agrees to reduced rent, or no rent at all, for a select period of time, to cover the total cost of the project.

✒ Built-in Cost – Landlord believes the tenant will be an improvement to their building or facility, and decides to cover the entire cost of the interior build out.

✒ Reimbursement – If the landlord is paying for it all, they will either have the tenants pay and then reimburse them, or divide the cost of the project and include it in the total cost of the lease. This is referred to as a build-to-suit lease agreement.

✒ Square Footage Costs – Landlord agrees to pay to remodel a certain square footage, and the tenant covers the rest of the cost of the project.

Will My Business Benefit from an Interior Build Out?

There are many advantages to doing to a commercial interior build-out, whether you are an existing business that needs a facelift or modern technology applications, or a business just started out and in need of commercial space. A custom interior finish-out not only updates your business, making its operations more efficient and cost-effective, it increases staff morale and productivity. Accordingly, all of these effects increase your business’s revenue overtime.

How Do I Get a Bid for a Commercial Interior Build Out in Indianapolis?

Contact BAF Corporation at 317-253-0531 for superior commercial construction general contracting and construction management in Indianapolis, Indiana. Our skilled and experienced commercial general contractors can help you design and build your interior build out, and offer a simple, streamlined process that meets all business objectives. We serve all corporate, commercial, and industrial industries in Indianapolis, Indiana and its surrounding districts. Call today to request free information or to schedule a consultation.

What is a Build-to-Suit Commercial Lease?

Posted on March 30, 2020 by bafcorp20

When a business owner is looking for an office space that will adequately meet the needs of the business, including its unique square footage requirements, they have four basic options. They can 1) lease or sublet an existing space that is vacant, 2) purchase an already-built property and renovate it as needed, 3) buy, build, and design a property from the ground up, or 4) opt for a build-to-suit lease.

Continue reading to learn more about this popular alternative the first three options, and where you can get started with a free quote.

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Commercial Build-to-Suit Leases

Buying and constructing a commercial property requires a significant, upfront investment that not every business owner can obtain. A commercial build-to-suit lease is a smart alternative for commercial tenants or business owners who wish to design and build their own facility without having to sacrifice this large expenditure, upfront.

In a build-to-suit lease, a commercial tenant chooses their preferred property, and then hires an Indianapolis design build (DB) real estate developer to plan, construct, and design their custom space. The commercial tenant will then lease the space from the developer. So, under a commercial build-to-suit lease, the tenant never actually owns the facility.

Build-to-Suit Lease Benefits

A commercial build-to-suit lease is the perfect solution for customizing a property to meets the unique space requirements of a business, without having to give up large sums of capital upfront. These lease agreements are especially beneficial for businesses that have outgrown their current space, and need a new space to accommodate their overall business objectives. Furthermore, these leases give tenants more options when it comes to looking for a space on the market, which makes finding the right size much easier.

Best of all, designing and building a commercial property from the ground up gives tenants the option to incorporate the most innovative technologies and cost-effective energy efficient solutions for commercial real estate. Not only can this improve success of the business, it can also help lower costs and save money. See our blog, “Top Commercial Real Estate Technology Trends Today” to learn some popular, modern day options for businesses and buildings.

Lease Terms and Conditions

A build-to-suit commercial lease is not a short-term agreement. Because such leases involve complicated tenant-developer financing, transactions, and similar logistics, they are usually a lengthy process that requires a lengthy commitment on both sides. Additionally, it is important to understand that build-to-suit leases are often more expensive than simply leasing an existing office space. But in the long run, the cost difference is counterbalanced by the cost-saving advantages a custom built office space will render.

Central Indiana Design Build Commercial Construction

Call 317-253-0531 to learn more about the trusted and esteemed Indianapolis commercial design build services at BAF Corporation. You can learn more about our services, or schedule a consultation to discuss your commercial construction and general contracting needs. We work with all corporate, commercial, and industrial industries in Indianapolis, Indiana and its surrounding areas.