Real Estate and Property Management
This domain tests portfolio decisions, lease economics, space measurement, and the boundary between property management and facility management.
Lease economics
A gross lease has the landlord paying operating costs, so rent is all-in. A net lease shifts specified costs to the tenant; a triple net lease adds taxes, insurance, and common-area maintenance to base rent. Watch escalation clauses (fixed or index-linked), expense stops, tenant improvement allowances, free rent, renewal and expansion options, termination rights, and restoration obligations.
Measurement
Under the standard measurement method, usable area is the tenant's exclusive space and rentable area adds the tenant's share of common area through the load factor. Rent is charged on rentable area.
Worked example
A tenant occupies 10,000 usable square feet on a floor with 12,000 rentable square feet. Load factor = 12,000 ÷ 10,000 = 1.20, or 20%. The tenant's rentable area is 10,000 × 1.20 = 12,000 square feet. At $30 per rentable square foot, annual rent is $360,000, and the effective cost per usable square foot is $36. Two buildings can quote the same headline rate and differ materially in real cost purely through load factor, which is why normalising before comparing is the tested step.
Portfolio management
Space demand forecasting, utilisation studies, churn rate, and a lease expiry profile that avoids clustering many expiries into one year. Consolidation, disposition, and sale-leaseback are portfolio levers, not facility levers.
Traps
- Comparing rents without normalising measurement standard and lease type.
- Leaving escalations out of total occupancy cost.
- Assuming property management equals facility management: property management runs the asset for the owner, including lease and landlord obligations; facility management runs the occupant's workplace and services.