CPM Leasing and Marketing 1 — Questions and Answers
Question 1: What is the primary goal of a property's marketing plan?
- To reduce operating expenses
- To attract qualified prospects and minimize vacancy (Correct answer)
- To increase property tax assessments
- To negotiate lower mortgage rates
Correct answer: To attract qualified prospects and minimize vacancy
A marketing plan identifies target audiences, outlines strategies to attract qualified tenants, and aims to minimize costly vacancy periods.
Question 2: What does 'absorption rate' measure in commercial real estate leasing?
- The rate at which tenants pay rent
- The pace at which available space in a market is leased over a given period (Correct answer)
- The speed of maintenance request completion
- The rate of lease expirations in a portfolio
Correct answer: The pace at which available space in a market is leased over a given period
Absorption rate measures how quickly available square footage in a given market is leased, indicating supply and demand dynamics.
Question 3: Which tenant screening criterion is permissible under Fair Housing law?
- Rejecting applicants from certain zip codes
- Using consistent, objective criteria such as minimum income and credit score thresholds (Correct answer)
- Requiring higher deposits from families with children
- Asking about an applicant's national origin
Correct answer: Using consistent, objective criteria such as minimum income and credit score thresholds
Consistent, objective criteria applied equally to all applicants—income ratios, credit scores, rental history—are permissible and reduce Fair Housing risk.
Question 4: What is a 'lease renewal option'?
- The landlord's right to terminate the lease early
- A provision giving the tenant the right to extend the lease at specified terms (Correct answer)
- A clause allowing the tenant to sublease
- A guarantee of rent escalation at renewal
Correct answer: A provision giving the tenant the right to extend the lease at specified terms
A renewal option gives the tenant the contractual right to extend the lease for an additional term, usually at a predetermined rent or formula.
Question 5: What is 'effective rent' in commercial leasing?
- The rent before any concessions are applied
- The average net rent over the lease term after accounting for all concessions (Correct answer)
- The rent paid in the first month of the lease
- The market rent as reported by appraisers
Correct answer: The average net rent over the lease term after accounting for all concessions
Effective rent averages the total net rent received over the entire lease term, factoring in free rent periods, tenant improvement allowances, and other concessions.
Question 6: What is the purpose of a 'tenant improvement (TI) allowance' in commercial leasing?
- To compensate a tenant for moving costs
- Landlord-funded money provided to a tenant to customize the space for their use (Correct answer)
- An annual rent credit for maintaining the property
- A deposit reduction for long-term tenants
Correct answer: Landlord-funded money provided to a tenant to customize the space for their use
A TI allowance is landlord-funded capital provided to help a tenant build out or customize the leased space to meet their operational needs.
CPM Leasing and Marketing 1
What is the primary goal of a property's marketing plan?