Commercial Real Estate FAQs
Commercial and Industrial Real Estate
Frequently Asked Questions
What is the difference between gross lease and net lease?
A gross lease means the tenant pays a fixed rent, with the landlord bearing property taxes, insurance, and maintenance costs. A net lease requires the tenant to pay some or all of those additional expenses.
How does vacancy rate impact commercial real estate investments?
A high vacancy rate means less income and possibly a decline in property value, making the investment less appealing. Conversely, a low vacancy rate can indicate strong demand and greater income potential.
What are tenant improvement (TI) allowances?
This is a set amount that landlords offer to help retrofit or refurbish the leased space to meet the tenant’s needs.
What is a triple net (NNN) lease?
This type of lease requires the tenant to pay all real estate taxes, building insurance, and maintenance on the property in addition to any normal fees expected under the agreement.
What are "Common Area Maintenance" (CAM) fees?
CAM fees are additional costs, usually in strip malls or office complexes, that cover the maintenance of common areas like parking lots, restrooms, elevators, and lobbies.
What is a capitalization rate (cap rate)?
The cap rate is a metric used in commercial real estate to indicate the potential return on an investment. It’s calculated by dividing the net operating income by the property’s current market value.
How is commercial real estate typically financed?
Investors often utilize traditional banks, commercial mortgage-backed securities, private lenders, or Real Estate Investment Trusts (REITs). These loans typically require a larger down payment and have shorter terms than residential loans.
What's the significance of location in commercial real estate?
Location determines accessibility for customers, employees, and suppliers. It affects property value, desirability, and potential for income and growth.
Aaron Voskani
Commercial and industrial real estate agent in the Southern California market. Contact me for a free property valuation and consultation.