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Balloon Payment
Amortization of a debt when the periodic payments are not sufficient to fully repay the principal amount plus interest so that at maturity a lump sum (balloon) payment is necessary. Balloon Payments will occur when the maturity of a debt is shorter than the total payment schedule.

Base Rent
The minimum rental amount specified in the lease agreement. The Base Rent may also be known as the Minimum Guaranteed Rent. Depending on the lease structure, the Base Rent may be a net rental amount (excluding all other expenses), or it may include items such as operating expenses and the amortization of tenant finish allowances.

Base Year
Generally the year in which the tenant first occupies the leased space. The Base Year is commonly used to calculate any increase in operating expenses that may be due from the tenant. For example: If the Base Year is 2000 and actual operating expenses for the year 2000 are $6.75 per square foot, an increase in operating expenses in the year 2001 to $7.00 per square foot would result in a rental increase to the tenant of $.25 per square foot.

Basis Points
Used in financing, Basis Points are the units in which loan fees are expressed and interest rate spreads are measured. 100 Basis Points equals 1%.

Big Box (Category Killer)
A retail tenant in the 20,000 to 200,000 square foot range. Typically these larger stores are dedicated to one category of merchandise.

Broker
A person licensed to negotiate the sale, purchase, leasing, or exchange of realty – or to arrange the financing thereof – for a fee or commission.

Build-To-Suit
Construction designed for a specific tenant because existing suitable space is not available or designed to include specific features not commonly found in the speculative market. The build-to-suit project is usually contracted with a developer who then owns the completed facility occupied by the tenant, or sells the facility to a third-party investor. Generally, a build-to-suit project becomes a single tenant building upon completion.

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CAM
See Common Area Maintenance.

Category Killer
See Big Box.

Class "A" Buildings
Most prestigious buildings competing for premier office users with rents above average for the area. Buildings are generally newer construction with high quality standard finishes, state-of-the-art systems, exceptional building amenities and a definite market presence.

Class "B" Buildings
Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate. These buildings may have been Class "A" buildings at one time but have not been renovated or lack the amenities necessary to be considered Class "A".

Class "C" Buildings
Buildings competing for tenants requiring functional space at rents below the average for the area. These buildings often suffer from some obsolescence, limiting the efficiency or usefulness of the space.

Common Area Factor (CAF)
The CAF (also called an "Add-On Factor" or "Load") is used to quantify the efficiency of a floor layout, i.e. the relationship between rentable and usable square footage. (Example: Using a 15% CAF – 20,000 rentable sq. ft./1.15 = 17,391 usable sq. ft.) A building will often quote an average CAF. However, the factor will be different on each multi-tenant floor, based on how the space is divided. The CAF for a single-tenant floor should be much lower because there are fewer corridors, and the bathrooms, etc., are not shared by other tenants. The CAF may include off-floor common areas such as the lobby, loading docks, etc., and tenants are charged based on their pro-rata share of the building.

Common Area
Common Areas are spaces that serve all the occupants of a particular floor or the entire building. These areas include lobbies, elevator lobbies, restrooms and mechanical rooms.

Common Area Maintenance (CAM)
Operating expenses related to the maintenance of building areas. These areas include lobbies, mechanical rooms, stairwells, walkways, and parking lots utilized by all tenants of a project. CAM is one of the nets included in the Triple Net lease structure.

Concessions
In order to attract tenants, a landlord may grant lease concessions. These incentives most often take the form of free rent but may also include lease buyouts, moving allowances and above-standard tenant improvement allowances.

Contract Rent
The rental amount stated in the lease contract. Contract rent does account for lease transaction costs or concessions such as free rent or moving allowances.

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Developer
An individual or company who combines raw land, roads, utilities, buildings, financing, and promotion into a completed operating property.

Distribution Warehouse
An industrial building used to distribute raw or finished materials to manufacturers, wholesalers and retailers. Distribution Warehouses are characterized by high ceiling heights, multiple loading dock doors, and good interstate access.

Dock-High Loading
Loading facilities where the building floor level is constructed at a height (typically four feet) sufficient to permit direct loading into trailers parked outside at ground level.

Drive-In Loading
Loading facilities where the building floor level is at ground level, allowing vehicles direct access to the interior of the building through overhead (roll-up) doors.

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Effective Rent
Effective rent equals contract rent less free rent and any concessions, such as a lease buyout or moving allowance. Escalations written into the lease are included in the calculation of effective rent. Tenant improvement allowances and brokerage commissions are not subtracted from the contract rate in calculating effective rent. (This definition is equivalent to the tenant effective rent.) A landlord or lender would likely also include tenant improvement allowances.

Escalation
Leases often include rent escalations or stepped increases to be paid by the tenant to the landlord at a specified future date (for example, year five of a 10-year lease).

Expense Stop
The per-square-foot annual amount the landlord agrees to pay for operating expenses. Once this amount is exceeded, the tenant pays its pro-rata share of the additional costs. The Expense Stop is often, but not necessarily, equal to the Base Year expenses.

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Finish Allowance (Tenant Improvement Allowance)
The amount of money which a landlord agrees to give the tenant to remodel the tenant’s space. It’s usually expressed as a dollar amount per square foot. The amount is subject to negotiation between the landlord and tenant. Landlords may be willing to provide a higher Finish Allowance than is typical for that property; however, any additional allowance is often amortized over the lease term plus interest.

Free Rent
To entice tenants, landlords may offer free rent, usually a certain number of months at the beginning of the lease when the tenant does not have to pay rent. A number of variations are possible, such as giving the tenant free rent in the middle of the lease or prorating the free rent into the tenant’s monthly payments.

Free-Standing Center
Typically 20,000 square feet or more, consisting of one building occupied by one major tenant. Includes stand-alone suburban department stores (e.g. Wal-Mart), as well as stand-alone department stores (not part of an integrated retail center or mixed-use project).

Full Service Lease
Lease structure in which all operating expenses are included in the lease rate paid by the tenant. Full Service Leases may also include operating expense escalation provisions such as Base Year or Expense Stops to pass through operating expense increases.

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Gross Lease
Lease structure in which operating expenses are included in the lease rate paid by the tenant. The Gross Lease often excludes janitorial expenses for weekly cleaning of the property. Gross Leases may also include operating expense escalation provisions such as Base Year or Expense Stops to pass through operating expense increases.

Gross Square Feet
The total constructed area of a building. Gross Square Feet is generally not used in leasing – rather, it is the measurement method used for calculating construction costs and quantities.




High-Cube Warehouse
An industrial building with a large open floor plate and high sidewalls able to accommodate pallet or racking systems designed to maximize use of the vertical height of the building.

HVAC
Heating Ventilation Air-Conditioning, or HVAC, is the cumulative term for the mechanical systems that provide climate control in a building.



Inventory
Inventory is the total building square footage in a particular geographical area that is considered competitive. Sometimes called the base, base inventory, or competitive inventory, the Inventory represents those properties on which the market statistics are generated. Not all properties in a market are included in the inventory. Some examples are buildings smaller than the minimum size threshold, functionally obsolete buildings and single tenant buildings.

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Land Lease (Ground Lease)
The lease of land for development of buildings or use by a lessee. Generally a long-term contractual agreement (10+ years) used in lieu of a land purchase.

Lease
Agreement giving possession and use of buildings or land in return for a specified rental payment.

Lease Buyout
A landlord may offer to buy out a tenant’s existing lease as an incentive or concession if the tenant will move into the landlord’s building. Owners may also offer lease buyouts in conjunction with the acquisition or disposition of property.

Lessee
Person renting property under a lease. A tenant.

Lessor
The person who owns the right to transfer possession to another (a lessee) under a lease agreement. A landlord.

Life Style Center
A retail shopping center comprised of high profile tenants selling higher priced goods. The design, landscaping and materials used in Life Style Centers are above average quality. These centers typically charge much more than normal strip shopping centers.

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Modified Gross (Industrial Gross)
Lease structure including most, but not all, operating expenses in the base lease rate. Common Area Maintenance charges are typically excluded. This type of lease is less popular than other types, but they are not uncommon in industrial properties.

Multi-Tenant
A building generally less than 75% occupied by its owner is a multi-tenant building.




Neighborhood Community Center
30,000 to 400,000-square-foot space with at least one anchor store, but usually two or more – especially supermarkets, drug stores, discount department stores or category killer outlets such as home improvement, books, electronics, apparel, etc.

Net Absorption
The net change in physically occupied space (regardless of whether it is direct or sublease) between the current measurement period and the last measurement period. Net Absorption can be either positive or negative.

NNN
See Triple Net.

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Obsolete
A building with design features or amenities that are no longer useful or functional for the occupants.

Operating Expenses
The expenses directly related to the annual maintenance and operation of a property. Operating expenses include real estate taxes, common area maintenance (CAM), insurance on the structure, utilities, maintenance, and property management fees. Capital expenditures, leasing fees and tenant-specific items are excluded.

Outlet Center
50,000 to 400,000 square feet with no dominant anchor stores. Tenants include manufacturers’ outlets and off-price merchandise retailers. Usually found away from major urban areas, though this is changing.

Owner-Occupied
A building that is at least 75% occupied by its owner.

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Pad Site
A small lot or parcel for a freestanding building. Usually located on the perimeter of a shopping center or retail development.

Percentage Rent
Rent charged based on a predetermined percentage of the tenant’s annual gross sales over an agreed-upon breakeven sales point. Used only in leases of retail centers, generally in addition to the Base Rent.

Power Center
250,000 to 800,000-square-foot shopping center with three or more anchors, such as category killers, home improvement stores, discount department stores, warehouse clubs and off-price outlets.







Research and Development (R&D)/Flex
Includes light industrial buildings with 30% or more office build-out and above-standard landscaping, amenities and window areas. They may accommodate an office tenant requiring 100% build-out or industrial tenants requiring a mixture of front office, light assembly and warehouse space.

Real Estate Investment Trust (REIT)
A means of holding real estate with limited liability. Similar to a mutual fund where shares of the real estate portfolio are purchased and profits are passed to owners without payment of corporate taxes. REITs are publicly traded on stock exchanges and must distribute at least 95% of the annual profits of the shareholders.

Rentable Square Feet (RSF)
The square footage measurement method most commonly used in calculating the monthly rental amount in office properties. Rentable Square Feet is directly related to the amount of common areas in a building and the efficiency of the building. It’s equal to the Usable Square Feet plus a tenant’s pro-rata share of the building’s common areas. Vertical penetrations such as elevator shafts, stairwells, and mechanical shafts are excluded from the common areas and Rentable Square Feet.

Regional Center
A 400,000-800,000-square-foot center with two or more anchors, such as full-line, junior or discount department stores, mass merchants, and fashion apparel.

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Showroom Center
25,000 to 75,000 square feet, with no dominant anchor stores, and a tenant mix focusing on a particular type of merchandise such as home furnishings or apparel.

Single Tenant
A building that is 100% occupied by a single tenant.

Specialty, Festival or Entertainment Center
80,000 to 250,000 square feet with no traditional anchor stores, but with restaurant, fashion and entertainment-oriented tenants. Entertainment centers are the current hot category, although some industry analysts dispute that a true, identifiable center type yet exists. They are, in many ways, the latest incarnation of the earlier festival (1980s) and specialty (1970s) concepts. Entertainment centers are typically anchored by a multiplex cinema, and there is a high proportion of restaurants. Retail establishments frequently include an entertainment focus. For example, many facilities allow testing of the merchandise (e.g. sporting goods and music stores) or have events related to the merchandise (e.g. cooking classes in a home store).

Speculative Construction
Designed to attract tenants likely to be in the market when the project is leasing. Prior to funding a speculative project, lenders may require a set amount of pre-leasing, often including an anchor tenant (a large tenant that will commit to a significant portion of the space). Sometimes the anchor tenant can influence the design of a speculative project, but essentially the project is designed to appeal to a broad cross-section of tenants in the marketplace. Typically, a speculative project becomes a multi-tenant building upon completion.

Strip Center
5,000 to 50,000 square feet, constructed with common walls in a strip facing the street. No dominant anchor stores, and convenience-oriented tenants.

Sublease
Sublease space is offered for lease to new tenants by the current tenant. This space often competes with direct lease space (offered directly by the building owner or agent), but may have below-market rents or flexible lease terms.

Super-Regional
A center that’s over 800,000 square feet with three or more anchors, such as full-line or junior department store, mass merchant and fashion apparel.

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Tax Increment Financing (TIF)
A municipal development tool allowing local governments to encourage development or redevelopment in particular geographic areas. TIF uses the increased tax revenues produced by a new project to finance the cost of improvements associated with that project. It is important to note that TIF does not reduce the amount of taxes currently paid to the city . . . it only reallocates the use of additional taxes generated by a new project. Uses of TIF proceeds are limited to property acquisition, site preparation, and construction of public improvements.

Tenant
Person who occupies or uses real estate under a lease. A Lessee.

Tenant Improvement Allowance
See Finish Allowance.

TIF
See Tax Increment Financing.

Triple Net (NNN)
A lease structure where all operating expenses are the responsibility of the tenant and may increase or decrease over the lease term. Operating expenses may be paid directly by the tenant or paid by the landlord and "passed through" to the tenant based on an annual or quarterly estimate. The three nets that comprise a Triple Net payment are Real Estate Taxes, Insurance for the Property, and Common Area Maintenance (CAM).

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Usable Square Feet
The square feet contained within the perimeter walls of a particular area or leased space. Usable Square Feet does not include any floor or building common areas. Usable Square Feet is the amount of space a tenant has under its exclusive control.




Vacancy
The vacancy rate is the amount of vacant space divided by the competitive building inventory. Vacant space is physically unoccupied, and it may or may not be available for lease or sublease. This is physical vacancy. It is not determined by whether or not a tenant is paying rent on the space.

Variable Air Volume (VAV)
A type of HVAC distribution system where individual "mixing boxes" combine heated and/or cooled air to obtain the desired air temperature. VAV systems are typically more efficient than other HVAC distribution types such as heat pumps.

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