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Understanding common commercial real estate terms

On Behalf of | Aug 7, 2018 | Commercial Real Estate |

California residents who enter into commercial real estate deals should understand that they have different terms compared to residential transactions. For instance, individuals may see a term called usable square footage (USF). The USF number lets them know how much space they can use to meet clients or produce goods. Examples of unusable space include hallways or exits.

This figure is separate from the rentable square footage in a building. It includes everything from an office space within the building to any bathrooms or lobbies that it may have. Typically, the total square footage of a given commercial space is what is used to determine the rent. In some cases, a tenant will be given the right of first refusal to take on any additional space that may become available within a building.

An escalation clause will determine whether or not rent will go up each year. Whether an increase occurs can depend on many factors such as whether property taxes go up or inflation increases during a given year. Finally, there may be assignment or subleases clauses in a commercial lease contract. These clauses will spell out whether or not a tenant is allowed to transfer the lease on either a temporary or permanent basis.

Renting a commercial property may be an effective way to help a business grow. Prior to signing a lease, it may be beneficial to determine how a dedicated office or retail space will impact a company’s bottom line. Business owners may wish to speak with their accountants and legal team to determine if a given lease best fits their needs.