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Commercial Real Estate Glossary of Terms, Acronyms & Abbreviations


A

Abated rent: An agreement where a tenant does not have to pay rent or may pay reduced rent for a certain period of time. This is typically done if the property cannot be occupied or requires maintenance or repairs, but may also be used in negotiations to attract or retain tenants.


Absorption: The rate at which available commercial space is leased or occupied by tenants over a specific period in comparison to the amount of space that is not leased or occupied. This is typically described as either positive or negative. This is different from Net Absorption. (See below)


Anchor tenant: Large, well-known, or prominent retailers or businesses that lease a significant portion of commercial property and help to attract tenants and customers. Also referred to as “key tenant,” “draw tenant,” or “anchor store.”

B

Base rent: The fixed rental amount that a tenant agrees to pay on a regular basis. This excludes additional charges for taxes, operating expenses, and miscellaneous costs included in the rental agreement.


Big box retail space: Large commercial spaces typically designed to accommodate large-scale retailers with expansive floor areas. These are often found in shopping centers or standalone buildings.


Biotech space: Specialized commercial spaces designed and equipped to support biotechnology research, development, and manufacturing activities. Biotech space falls under the umbrella of life science spaces.


Build to suit: A construction method where a developer constructs a property according to the specifications and requirements of a particular tenant. In this arrangement, the tenant usually signs a long-term lease before the construction begins.


Building class: A classification system used to categorize commercial properties based on various factors, such as age, quality, amenities, location, and overall desirability. (Read more about building classes)


C

Capital expenses: Often called cap-ex, these are expenses incurred to improve, maintain, or upgrade a property's physical structure or systems. This includes expenses related to renovations, replacements, or major repairs.


Certified property manager (CPM): A professional designation awarded by the Institute of Real Estate Management (IREM) to individuals who meet specific educational and experience requirements in property management.


Class A building: A high-quality, well-maintained commercial property that features modern amenities, prime location, and superior construction. This type of property attracts prestigious tenants and commands higher rents.


Class B building: A mid-tier commercial property with average-quality finishes and amenities, attracting a broader range of tenants. This type of building brings in lower rental rates than Class A buildings.


Class C building: A lower-quality commercial property, often older and in need of significant renovations or updates. This type of building is appealing to tenants seeking lower rental rates.


Commercial real estate (CRE): Real estate properties primarily used for business purposes, such as office buildings, retail centers, industrial warehouses, and multifamily housing complexes.


Common area factor (CAF): A percentage used to determine a tenant's proportionate share of the common areas in a commercial property. CAF is usually applied when calculating rentable or usable square footage.


Common area maintenance (CAM): The costs associated with operating and maintaining the common areas of a commercial property, such as landscaping, security, cleaning, and repairs. CAM is generally passed on to tenants as additional charges.


Construction starts: The number of new construction projects that have begun during a specific period, indicating the level of construction activity in a given market.


Consumer price index (CPI): A measure of the average change over time in the prices paid by urban consumers for a basket of goods and services. This is often used as an economic indicator to assess inflation.


Contract rent: The agreed-upon rental amount between a landlord and a tenant as specified in the lease agreement.


Core investment: An investment strategy focused on acquiring stable, income-generating properties in prime locations with long-term value and minimal risk.


Cowork space: A shared workspace environment where individuals from different companies or professions work independently or collaboratively in a flexible, community-oriented setting.


Cross dock: A logistics facility or warehouse specifically designed to receive goods from inbound trucks or shipments and then load them onto outbound trucks, facilitating efficient distribution and transportation.


D

Direct lease space: Commercial space that is available for lease directly from the property owner or landlord, without involving a third-party leasing agent. Learn more about types of CRE leases.


Direct new space: Newly constructed or developed commercial space that is available for lease directly from the property owner or developer.


Direct vacancy rate: The percentage of available and unoccupied space in a specific commercial real estate market, calculated without considering subleased or shadow space. (See Shadow space / Phantom space).


Double net lease: A lease agreement where the tenant is responsible for paying property taxes and insurance, in addition to the base rent. In this arrangement, the landlord covers other operating expenses such as maintenance and repairs.


E

Effective rent: The actual rental income received after accounting for factors such as concessions, incentives, and lease terms.


Encumbered space: Property or space that is offered for lease, but which another tenant has the right to occupy at a future date.


Exurban: A residential or commercial property located beyond suburban developments, with relative proximity to urban centers.


F

Flex facility: A commercial property with flexible functionality that is designed to accommodate the changing needs of various types of businesses. This is also referred to as flex space.


Floor area ratio (FAR): A zoning regulation that determines the maximum allowable floor area of a building or structure in relation to the size of land that it occupies.


Freestanding building: A standalone building or structure that is not physically connected or attached to surrounding or adjacent buildings.


Fulfillment center: A commercial facility or property used by e-commerce companies or retailers to store inventory and manage online order fulfillment by receiving, packing and shipping products.


Full-service lease: A lease agreement in which the tenant pays a fixed amount while the landlord or property owner is responsible for covering all operating costs including but not limited to property taxes, maintenance costs, utilities or other common expenses.


G

Government building: A facility owned or occupied by a government entity at a local, state or federal level. Government buildings are used for administrative, legislative, judicial, or public service purposes.


Gross building area: The total floor area of a building or structure including both usable and non-useable space, such as hallways, mechanical rooms, basements and storage areas.


Gross leasable area: The total floor area within a commercial property that is available to lease to tenants. This generally excludes common areas such as hallways, staircases or lobbies.


Gross lease: A lease agreement in which the tenant pays a fixed rent amount and the property owner or landlord is responsible for covering all operating expenses associated with the property such as property taxes, maintenance costs, and utilities.


Ground lease: A long-term lease agreement in which a tenant leases land typically for the purpose of constructing and operating a building or other development. Along with leasing the land, tenants are typically responsible for expenses such as property taxes and maintenance costs.


H

High-rise office building: A tall commercial building, generally above 10 floors high, that is designed to accommodate one or multiple businesses or organizations.


High street retail: Commercial properties typically located together in urban or high-traffic areas with a large volume of shopping and commercial activity. A range of businesses is included in high street retail, including restaurants, boutiques, cafes or specialty stores.


I

In-line store: A retail space that is located within a larger shopping center or mall, located between other retail spaces, typically sharing common walls with neighboring stores.


Industrial building: A commercial property specifically designed and used for industrial purposes. These typically feature open floor areas, high ceilings, loading docks and specialized infrastructure to accommodate industrial operations.


Infill: Development or redevelopment intended to maximize efficient land use or revitalize urban areas. This typically occurs in dense areas and involves constructing new buildings or repurposing existing structures in established neighborhoods.


J & K

Joint tenancy: A form of property ownership where two or more individuals, referred to as joint tenants, hold equal ownership rights and undivided interest to a property. If one tenant passes away, their interest is transferred to the surviving joint tenant. This is the opposite of tenancy in common ownership in which the property goes to the remaining heir, not the additional owners. (See Tenancy in common)


Key performance indicators (KPI): Metrics used to evaluate the performance and success of a business or a specific project, such as occupancy rate, rental income, return on investment (ROI), net operating income (NOI), lease renewal rate, and tenant satisfaction.


L

Lease: A legal agreement between a property owner and a tenant, granting the tenant the right to occupy and use a property for a specified period of time in exchange for rent payments and compliance of terms and agreements.


Lease buyout: The event in which a tenant terminates a lease agreement before its scheduled end date by paying a negotiated sum to the property owner. This allows the tenant to end the lease early and avoid further obligations under the lease terms.


Lease commencement date: The specified date on which a lease agreement becomes effective, and the tenant officially gains the right to occupy and use the leased space.


Leased space: The portion or area within a property that the tenant has the right to use and occupy for personal or business purposes as specified or defined under a lease agreement.


Lease terms: The specific provisions, conditions, and clauses outlined in a lease agreement, including details such as lease duration, rent amount, permitted use and other agreed-upon conditions.


Leasehold: The rights or interest a tenant holds in a property under a lease agreement, such as temporary ownership of the property for the duration of the lease.


Leadership in Energy and Environmental Design(LEED): A rating system developed by the U.S. Green Building Council (USGBC) designed to help assess and certify the sustainability of buildings. Getting LEED certified is a voluntary process.


Lessee: An individual or entity that enters into a lease agreement with a property owner or landlord, also referred to as a tenant.


Lessor: An individual or entity that owns a property and enters into a lease agreement with a lessee or tenant, also referred to as a landlord.


Life sciences space: A specialized commercial facility designed to accommodate research, development and production activities related to pharmaceuticals, medical devices, and other life science industries.


Light industrial: A commercial property or building that is primarily used for assembly, production and storage. Products produced in such settings typically go direct to customers, unlike manufacturers that produce goods for other businesses including retailers.


Load factor: A metric used to determine the total space in a commercial property that can be leased to a tenant versus the total space that is usable by tenants, such as common spaces, hallways, lobbies, stairwells and restrooms. Sometimes referred to as a common area factor.


Loan to value (LTV): The ratio of a loan’s amount to the appraised value or purchase price of a property.


LOI (letter of intent): An initial non-binding document used to outline preliminary terms and conditions of a potential agreement between a tenant or buyer and a property owner.


Low-rise office building: A commercial property that has a limited number of floors, ranging from 2 to 5 stories, intended to accommodate various businesses, service providers or small- to medium-sized companies.


M

Manufacturing: Properties or facilities specifically designed and equipped for the industrial production, assembly or fabrication of products and materials.


Market rent: The typical or prevailing rent amount that can be expected on a property based on factors such as location, condition, demand, and comparable rental rates in the surrounding market.


Master lease: A lease agreement in which the primary tenant, known as the master tenant, leases property from a landlord or property owner and subsequently subleases or rents out portions of the property to other subtenants.


Medical office building (MOB): A specialized commercial property designed to accommodate medical and healthcare-related practices and services, such as healthcare providers, medical clinics, dental offices or other medical services.


Mid-rise office building: A commercial property that has a moderate number of floors, ranging from 5 to 10 stories, intended to accommodate various medium- to large-sized businesses and organizations.


Mixed-use development: A development or property that integrates a mix of residential, commercial and industrial spaces, such as apartments, retail shops, entertainment venues, office spaces and restaurants.


Modified lease: An agreement in which the property owner and tenant negotiate the allocation of various operating expenses of associated costs such as property taxes, insurance and property maintenance. Also known as a modified gross lease.


Multi-family housing: Residential buildings or properties that are designed and intended to accommodate multiple, separate housing units within a single structure or complex. Apartments, condominiums, and townhomes are examples of multi-family housing.


Multi-tenant building: A commercial property that contains separate spaces or units that are leased to multiple tenants. Office buildings, industrial complexes, and shopping centers are examples of multi-tenant buildings.


N

Neighborhood shopping center: Retail property designed to serve the surrounding local community. This type of property usually consists of small to medium stores that fulfill the needs of local residents, such as pharmacies, convenience stores, grocery stores, and restaurants.


Net absorption: The change in how much commercial space is occupied over a specific period of time. Positive net absorption points toward an increase in occupied space, and negative net absorption indicates a decrease in occupied space.


Net lease: A type of lease agreement in which the tenant must pay for all or a portion of operating expenses in addition to their base rent. Property taxes, insurance, and maintenance costs are examples of the types of operating expenses that may be included.


Net operating lease (NOI): The income that is generated after deducting operating expenses but prior to deducting financing expenses and taxes. This financial metric is used to help determine the profitability of a piece of property.


Net net net lease (NNN): A type of lease agreement in which the tenant is required to pay net real estate taxes, net operating expenses, and net property insurance. Also called a triple net lease, this arrangement places more of the financial burden for the property on the tenant. (See triple net lease)


O

Occupancy date: The date a tenant takes possession of and begins occupying a leased space or property. This is the point at which the tenant assumes the responsibilities outlined in their lease.


Office building: A commercial property that is designed to house various businesses, organizations, and professional services. Office buildings typically have individual office spaces or suites that are leased to different tenants and may have shared common areas like lobbies, restrooms, and hallways.


Office condominium: An ownership structure where individual units within a piece of property are independently owned instead of leased. Common areas may be shared between all owners. These are also referred to as office condos.


Office warehouse: A type of commercial property that has space for administrative activities along with warehouse or storage space for inventory, product distribution, or manufacturing.


Operating expenses: The ongoing costs associated with operating and maintaining commercial property. Examples of operating expenses include utilities, property taxes, repairs, and general upkeep.


Option term: A period of time outlined in a lease agreement during which the tenant has the right to extend or renew the lease. If a tenant exercises the option, they can occupy the property for a period of time that extends past the original terms of their lease.


Owner-occupied building: A building that is owned by a business and used for that business's own operations. In this situation, the property is not owned by one entity and leased to multiple parties, but owned and occupied by the same entity.


P & Q

Phantom space: Unoccupied or underutilized space that is not actively being used by the tenant. This is also called shadow space, and it often occurs when a company holds unoccupied space for future growth or downsizes and no longer uses all the space it leases.


Pop-up retail: Temporary retail establishments that are only open for a short period of time. This can range from a few days to a few months. Seasonal retail stores are an example of pop-up retail stores.


Power center: A retail development that features several large, anchor stores. These are typically big-box retailers such as major department stores or home improvement stores. These centers often have a shared parking lot and may include smaller retail spaces.


Pro rata share: The portion of expenses shared by tenants within an office space, retail center, or other shared property. Typically the amount paid by tenants is proportional to the amount of space they occupy as set forth in a lease agreement.


R

Real estate investment trust (REIT): A company that owns, operates, or finances multiple income-generating real estate properties. This may also include air, water rights, and other commodities. Investors can purchase shares and invest in a diversified real estate asset portfolio through REITs.


Real estate owned (REO): Properties that are owned by a lender, usually a bank, as a result of foreclosure or default by the previous owner.


Real property administrator (RPA): A professional designation for individuals that manage the day-to-day operations of commercial real estate properties. They oversee general property operations, leasing, maintenance, as well as tenant relations.


Redevelopment: The process of making significant changes to existing structures and/or land in order to better meet market demands or community needs. This may include improving function and aesthetics.


Regional shopping center: A large commercial property that acts as a retail hub with a variety of stores, entertainment outlets, and restaurants. These spaces are designed to attract shoppers and capture as much retail activity as possible.


Rent commencement date: The date a tenant begins to pay rent. This date marks the official start of the lease term.


Rent concession: A temporary or permanent adjustment made to the terms of a lease, such as a discount or special offer, that reduces the tenant’s financial obligation.


Rentable building area (RBA): The total square footage within a commercial building that is available for lease. RBA typically includes usable areas and common areas like hallways or lobbies.


Right of first offer (ROFO): A contractual right that gives a party, usually a tenant, the first opportunity to purchase or lease a property before it is offered to others. The party with ROFO is not obligated to pursue the opportunity but must be offered it.


Right of first refusal (ROFR): A contractual right that gives a party, usually a tenant or an existing owner, the option to purchase a property before it is offered to others. ROFR provides the holder the ability to match or refuse offers that have been made on a piece of property.


ROI (return on investment): A financial metric used to help evaluate how profitable an investment is. It represents the profit earned after subtracting the costs associated with the investment.


S

Security deposit: A payment made by a tenant to a landlord or property owner that acts as a financial security against potential damages to the property or non-payment of rent. This may or may not be refundable upon the termination of the lease, minus deductions for damages or unpaid charges.


Shadow space: Also known as "phantom space," this refers to unoccupied or underutilized space that is not being used by tenants. This may happen if a tenant is renting space that it does not currently need in anticipation of growth. It also happens when occupied space is no longer in use, such as when a company downsized.


Shell space: Unfinished or unoccupied commercial space that lacks interior finishes, such as walls, flooring, or ceiling systems. This type of space allows tenants to customize the property to better fit their specific needs.


Single-tenant building: Property that is fully occupied by a single tenant rather than multiple tenants.


Step lease: A type of lease agreement in which the rent increases or "steps up" at predetermined intervals during the life of the lease. Also known as a graduated lease.


Straight-line rent: A method of accounting that evenly distributes the total lease payments over the lease term instead of recognizing the rent as a fixed amount each month. This method results in consistent monthly rent expenses on financial statements and makes it easier to account for fluctuations such as rent-free periods.


Strip shopping center: A strip shopping center, also called a strip mall, is a type of retail property with connected storefronts facing a shared parking lot or walkway. It usually features a mix of retail, service, and convenience-oriented businesses.


Sublease: A sublease refers to a situation where a tenant leases out part or all of the space they are currently leasing from another party. The original tenant becomes a sublessor, while the new tenant is referred to as the sublessee.


Sustainable development: An approach to urban planning and construction that seeks to meet the demands of today without depleting natural resources and harming future generations. This often includes an emphasis on environmental stewardship and economic viability.


T

Takeup: The amount of space that is leased or occupied within a certain period of time. This is often used to help determine demand.


Tenancy in common: A form of property ownership where multiple parties have equal or unequal undivided ownership of a property. A distinguishing factor of this type of arrangement is that if one owner dies, their portion is passed to their heirs and not the other owners. This is the opposite of joint tenancy, in which ownership is passed to the additional owners, not heirs. (See Joint tenancy)


Tenant improvements (TI): Modifications or alterations made to a leased commercial property to meet the needs of a tenant. This is also known as leasehold improvements.


Tenant rep: A commercial real estate professional who represents and advocates for the interests of tenants in leasing transactions.


Tenants: Individuals or entities that occupy or lease a property.


Total inventory: The entire supply of available commercial real estate properties within a specific market, geographic area, and timeframe.


Traditional outlet retail center: A commercial property that has multiple stores which offer factory-direct or discounted merchandise.


Traditional retailer: A company that operates physical brick-and-mortar stores that customers can visit to buy goods or obtain services.


Transit-oriented development (TOD): Mixed-use developments of residential, commercial, office, and entertainment properties located near public transportation hubs. TOD is designed to promote walkability and sustainable living.


Triple net lease: A type of lease in which the tenant is responsible for paying operating expenses, property taxes, and insurance costs in addition to base rent.


Trophy building: A prestigious and highly sought-after commercial property that is known for having desirable features. This includes having an exceptional design, a prime location, or because it houses notable tenants.


U & V

Urban development: A term that refers to the planning, design, and implementation of projects within urban areas. Infrastructure development, land use planning, housing projects, transportation improvements, and revitalization efforts are all examples of urban developments.


Usable area: Refers to the portion of a commercial property or building that can be occupied and used by tenants. This typically excludes common areas like hallways and mechanical rooms.


Vacancy rate: The percentage of vacant or unoccupied rental units or amount of square feet available for rent. This is often used to help measure supply and demand and the overall health of the real estate market in a given area.


Vacant space: Vacant space refers to the portion of a property or building that is unoccupied and available for lease, sublet or sale.


Value-add investment: A strategy where investors seek to enhance a property’s value by making improvements and modifications.


W, X, Y, Z

Walk score: A rating system that helps to measure how walkable a neighborhood or location is based on how close it is to amenities and services. This score helps to determine how friendly an area is for pedestrians.


Walkability: A term that refers to the ease of walking from a neighborhood or location to essential services, recreational facilities, and public transportation.


Warehouse: A commercial property that is used to store, distribute, or otherwise manage goods and products. These tend to be large open spaces with high ceilings, loading docks, and similar features that facilitate operations.


Yield on cost: A financial metric used in commercial real estate to assess the return on investment. It is calculated by dividing a property’s net operating income by its total acquisition cost.


Zero cash flow property: A type of commercial real estate investment which generates little or no positive cash flow. These types of properties are sometimes simply referred to as “zeros.”


Zoning reports: Official reports that provide information about the zoning regulations and restrictions applicable to a property. This includes permitted land uses, building requirements, height restrictions, setbacks, and a range of other zoning-related details.

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