Commercial Real Estate Terms

A quick-reference glossary for property owners, tenants, and investors working with NAI Elrod Group in Athens, GA and Northeast Georgia.

Letter of Intent (LOI)

A written outline of the basic terms both sides agree to before drafting a full lease or purchase agreement. Most of an LOI is non-binding, but it sets expectations and speeds up the final contract.

Due Diligence Period

The window after a purchase agreement is signed when the buyer investigates the property — inspections, title work, zoning, environmental review — before the deal becomes final.

Triple Net Lease (NNN)

A lease where the tenant pays rent plus their share of property taxes, insurance, and maintenance. Common in retail and industrial leasing. Read more about NNN leases →

Modified Gross Lease

A middle-ground lease where the landlord and tenant split operating expenses by agreement, rather than the tenant covering all of them (NNN) or the landlord covering all of them (Gross).

Gross Lease (Full Service)

The landlord pays the property’s operating expenses and taxes out of the rent collected. Common in office leasing.

Common Area Maintenance (CAM)

The tenant’s share of the cost to maintain shared spaces — parking lots, landscaping, lobbies — usually billed on top of base rent. Read more about CAM fees →

Tenant Improvements (TI)

Build-out or renovations made to a space to fit a tenant’s needs, whether paid by the landlord, tenant, or split between them.

Net Operating Income (NOI)

A property’s income after operating expenses, but before debt payments and taxes. The starting point for most valuation math.

Capitalization Rate (Cap Rate)

A property’s expected annual return, calculated by dividing NOI by the purchase price. Investors use it to compare properties. Read more about Cap Rates →

1031 Exchange

A tax provision that lets an investor sell a property and reinvest the proceeds into a similar property, deferring capital gains tax. Read more about 1031 exchanges →

Class A / B / C Office

A relative ranking of office buildings based on location, finishes, and building systems — Class A commanding the highest rents, Class C the most affordable. Read more about Office Space Classification →

Net Absorption

The net change in occupied space in a market over a given period — a key signal of whether demand is growing or shrinking.

Clear Height

In an industrial building, the usable vertical space from floor to the lowest overhead obstruction — a major factor in what a tenant can store or rack.

Loan-to-Value Ratio (LTV)

The ratio between a loan amount and the property’s value, expressed as a percentage. Lenders use it to gauge risk.