The distinction between market rent and contract rent is important due to differences in lease terms. Office, retail, and industrial tenants most commonly occupy their space under leases that run:
A) one year or less
B) one to three years
C) three to five years
D) ten years or more

Question

Quizplus · Accepted Answer

Office, retail, and industrial tenants typically lease their space for longer terms than one year or less, and usually longer than one to three years. These types of tenants often occupy space for extended periods and require stability in their rental costs, therefore a lease term of three to five years is common. This lease length allows for market rent to be reevaluated at set intervals, whereas a longer term lease, such as ten years or more, may not allow for rent adjustments to keep up with market changes. The distinction between market and contract rent becomes important in these longer-term leases, as the tenant may end up paying above or below market rent for an extended period of time.

The Distinction Between Market Rent and Contract Rent Is Important