Teaching Legal Elements of Commercial Real Estate Leases to Business Undergraduate Students Through an Interactive Experiential Learning Exercise

• Date: 01 December 2021
• Author: Konrad S. Lee,Laura Kent‐Jensen
• DOI: http://doi.org/10.1111/jlse.12112
• Published date: 01 December 2021

Journal of Legal Studies Education

Volume 38, Issue 1, 75–95, Winter 2021

Teaching Legal Elements of

Commercial Real Estate Leases to

Business Undergraduate Students

Through an Interactive Experiential

Learning Exercise

Konrad S. Lee∗and Laura Kent-Jensen∗∗

The following is a description of an interactive exercise for teaching the gen-

eral components of commercial real estate leases1to an introductory Legal

and Ethical Environment of Business Law undergraduate class. Part I pro-

vides the context for commercial real estate leasing in the United States. Part

II introduces the characteristics of and legal environment for commercial

leases. Part III offers the rationale for illustrating business concepts through

an experiential module. Part IV outlines the classroom exercise with instruc-

tions. Finally, Part V provides a framework for the instructor to measure the

learning goals and eff‌icacy of the exercise.

I. The Scope of Real Estate Leasing in America

The commercial leasing of real estate is a multibillion-dollar industry in

the United States. According to the United States Census Bureau’s most

∗Associate Professor of Law and Management, Jon M. Huntsman School of Business, Utah State

University

∗∗JD candidate 2022, S.J. Quinney College of Law, University of Utah.

1The commercial lease is an effective element of an undergraduate business law course cur-

riculum, useful for illustrating important contracts and property law concepts. Similarly, the

non-prof‌it American Legal Institute Continuing Legal Education (ALI CLE) offers several

courses in Commercial Real Estate Leases for real estate business professionals and attorneys

to earn credit hours in business law and ethics. See, e.g., Annual Advanced Course for Land-

lord, Tenant, Property Manager, and Lender Counsel Commercial Real Estate Leases 2018, ALI CLE,

https://www.ali-cle.org/course/CZ013 (last visited June 23, 2020).

© 2021 The Authors Journal of Legal Studies Education © 2021 Academy of Legal Studies in

Business

75

76 Vol. 38 / The Journal of Legal Studies Education

recent report, 34,873 establishments leased nonresidential real estate to

commercial tenants in 2017, generating over $122 billion in revenue.2The

two largest markets for commercial leases were California and New York,

each at approximately $20 billion, and the smallest was Idaho with revenue

of $66 million.3The total revenue represented a 27% increase from 2012 f‌ig-

ures, even as the number of lessor establishments remained fairly constant.4

The major segments within the commercial leasing market are profes-

sional and off‌ice space (46% of total revenue), shopping centers and retail

stores (35%), and manufacturing and industrial buildings (10%).5In Febru-

ary 2020, the National Association of Realtors Research Group6reported

“broadly strong” leasing activity in off‌ice and industrial space, whereas ac-

tivity in retail malls contracted in comparison to the previous year.7During

2019, vacancy rates “generally trended down” for the small commercial real

estate sector, ranging from 5% for industrial space to 8.8% for retail and

9% for off‌ice space.8Over the last decade, commercial leasing activity shows

the recovery from the Great Recession of 2008, with year over year increases

peaking at 15% in 2015 before settling to a more modest yearly increase of

3% in 2019.9Overall, the commercial leasing market through the beginning

of 2020 was stable.10

2U.S. Census Bureau, EC1753BASIC, Real Estate and Rental and Leasing: Summary

Statistics for the U.S., States,and Selected Geographies: 2017 (Released May 14, 2020).

3Id.

4Compare id., with U.S. Census Bureau, EC1753A1, Real Estateand Rental and Leasing: Ge-

ographic Area Series: Summary Statistics for the U.S., States,Metro Areas, Counties,

and Places: 2012(2015). Interestingly, the number of California establishments grew while the

number of New York establishments declined during this period.

5U.S. Census Bureau, EC1753A1 (2015).

6The National Association of Realtors is America’s largest trade association for real es-

tate professionals. Its Research Group provides the latest real estate research and statistics

that affect the industry, publishing periodic market reports. See Research and Statistics, NAR,

https://www.nar.realtor/research-and-statistics (last visited June 24, 2020).

7See Nat’l Ass’n of Realtors Research Grp., Commercial Real EstateTrends & Outlook

10 (February 2020); see also Lawrence Yun, SIOR Commercial Index Shows a Pickup in Off‌ice and

Industrial Markets in 2019 Q4,SIOR Report, Spring 2020, at 56, 57.

8Nat’l Ass’n of Realtors Research Grp., supra note 7.

9Id.)

10In early 2020, the COVID-19 pandemic began to have a signif‌icant detrimental effect on the

market for leased space. See, e.g., Shawn Moura & Trey Barrineau, This Is Not a Financial Crisis.