Construction Insurance and Real Estate
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Commercial real estate definitions – from A to Z

by Dan Lewis

Commercial real estate is distinctly different from residential real estate. The terminology is very different and here is a list of new terms from A to Z.

According to Value: The value of the property when computing property taxes.

Build to Suit: A customized design and build approach for a single tenant space usually resulting in a single occupant building which is then leased or sold to the tenant.

Certificate of Occupancy: Issued by a city building department and is a necessary requirement prior to moving into the space.

Common Area Maintenance: Typically an annual charge assessed to tenants based on their percentage of occupancy to pay for maintenance of parking lots, bathrooms and open areas.

Demising Wall: A wall between two separate suites in a building with multiple tenants. In many states, the demising wall must meet specific fire safety standards.

Flex Space: A building providing mixed-use space such as an area combining an office and warehouse.

Gross Square Feet: Usually refers to gross footage of a building. GSF is typically arrived at by calculating the footage from the outside of exterior walls multiplied by the vertical footage.

HVAC: Refers to the climate-control systems for a building including heating and air conditioning

Mechanic’s Lien: A legal claim typically filed by a subcontractor to obtain payment for services rendered. The claim arises under state law and is dependent on each states particular law.

Operating Expenses: Just as it sounds, operating expenses are those costs associated with operating a commercial property. Contract and state law typically govern the exact nature of the operating expenses.

Partition Wall: A wall built in the internal area of a suite to divide the general space. For instance, offices built during a tenant improvement project will have partition walls separating them.

Punch List: A punch list runs part and parcel with a walk-through of completed construction work. The construction company and client will walk through the area and complete a punch list of items that need to be fixed or modified.

Shell Space: The interior of a commercial building that has been completed, but does not yet have any tenant build-outs. The shell space generally refers to this gross square footage regardless of whether tenant improvements have occurred or not.

Substantial Completion: Notice given by a contractor to the client indicating the property has been completed to the point where a walk-through and punch list review are appropriate.

Usable Square Feet: The square feet in a building, suite, warehouse and so on that can actually be used by tenants. Due to building regulations and design issues, certain amounts of a space in a tenant suite may not be usable and such footage is excluded from this calculation

Unlike residential real estate, commercial real estate is primarily considered a business transaction. Learn the terms and you’re well on your way to moving smoothly through the process.

About the author
Dan Lewis is a San Diego mortgage broker with Great Western Mortgage - San Diego mortgage brokers writing San Diego home loans. Dan also writes San Diego home equity loans, refinance and San Diego mortgages.

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