Above Building Standard:
Specialized design and engineering services and
all construction necessary to personalize tenant space.
Assessment:
(a) An estimate of property value for the purpose of imposing
taxes.
(b) A fee imposed on property, usually to pay for public
improvements such as streets and sewers.
Asking Rental Rate:
Gross asking rates per square foot for direct space, weighted by the amount of square footage available.
Base Rent:
A set amount used as a minimum rent in a lease which also
employs a percentage or other allocation for additional rent.
Base Year:
The year upon which a direct expense escalation of rent is
based.
Below-grade:
Any facility or part of a facility located underground or
below the surface grade.
Buffer:
A strip of land established as a transition between distinct land
uses. May contain natural or planted shrubs, walls or fencing, singly or
in combination.
Building Classifications:
Class A: Building has excellent location and access to attract the
highest quality tenants. Building must be of superior construction and
finish, relatively new or competitive with new buildings, and providing
professional on-site management.
Class B: Building with good location, management, construction land
tenancy. Can compete at low end of Class A.
Class C: Generally an older building with growing functional land/or
economic obsolescence.
Class D: An older building in need of extensive renovation as a result of functional obsolescence or deterioration.
Building Code:
A set of laws, usually enacted to city ordinance or other
local jurisdiction, regulating the design, materials and construction of
buildings.
Building Standard:
A list of construction materials and finishes used in building out office space for a tenant that the landlord contributes as part of the tenant improvements. Examples of standard building items are: doors, partitions, lights, floor covering, telephone outlets, etc. May also specify the quantity and quality of the materials to be used and often carries a dollar value.
Building Standard Plus Allowance:
One of three arrangements often used for financing tenant improvements (finishing out office space to accommodate a tenant such as walls, doors, carpeting, etc.) Under this arrangement the landlord lists in detail all materials and costs to make the premises suitable for occupancy and provides a negotiated allowance for the tenant to customize or upgrade materials.
Buildout:
The cost of configuring and finishing new or relet space in accordance with a tenant's specifications.
Build-to-suit:
A method of leasing property whereby the landlord builds a new building in accordance with a tenant's specifications.
CBD:
Central Business District. The "downtown" area.
Certificate of Occupancy:
A certificate issued by a local government building department or agency stating that a building is in a condition suitable for occupancy.
Common Area:
The total area within the building that is not designated for
rental to tenants, but that is available for common use by all tenants or
groups of tenants and their invitees. Parking and its appurtenances,
malls, sidewalks, landscaped areas, public toilets, truck and service
facilities, and the like are included in the common area.
Competitive Space:
Space in office buildings which contain or are intended
to contain more than one occupant. In addition to the multiple tenant
criterion, typical characteristics of Competitive Space include: tenants
generally have short-term leases (10 years or less) and the interior of the
building is not designated with one organization in mind but rather to
accommodate the widest variety of tenants.
Concessions:
Cash expended by the landlord in the form of rent abatement,
build-out allowance, or other payments to induce the tenant to sign a
lease.
Contiguous Space:
Adjoining office space.
Contract Rent:
Rent paid under a lease. The actual rent as opposed to the
market rental value of the property.
Construction Completions:
Buildings that received their Certificate of Occupancy. Tenancy may not yet have taken place.
Core Factor:
The percentage of common areas in a building (rest rooms,
hallways) that, when added to the net usable square footage equals the net
rentable square footage. May be computed for a building or floor of a
building. A "Loss Factor" or "Load Factor" is calculated by dividing the
rentable square footage by the usable square footage.
Cumulative Discount Rate:
A discount factor applied to the rental rate that
takes into effect all landlord lease concessions expressed as a percentage
of base rent.
Delivered Buildings:
Buildings that have completed construction and are
ready for tenant build-out. May or may not yet have a Certificate of
Occupancy.
Demising Walls:
The boundaries that separate a tenant's space from another tenant's space and from a public corridor.
Direct Available Space:
Space available through the building landlord.
Direct Vacancy Rate:
Space, available through the landlord, divided by the inventory. Space in properties under construction or under renovation is not included.
Economic Rent:
Calculations or analyses to determine market rental value of a property at any given time, even though the actual rent may be different.
Effective Rent:
The rental rate actually achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant, usually expressed as an average rate over the term of the lease.
Efficiency Factor:
The number resulting from dividing the usable area by the gross building area in an office building, providing benchmark measurement for that building's use as an office building.
Escalation Clause:
A clause in a lease providing for increased rent at a future time. May be accomplished by several means such as
(1) Fixed increase - a provision that calls for a definite, periodic rental increase;
(2) Cost of living - a clause that ties the rent to a government cost of
living index, with periodic adjustments as the index changes; or
(3) Direct expense - Rent adjustments based on changes in expenses paid by the landlord, such as tax increases, increased maintenance costs, etc.
Exclusive Listing:
A written agreement between a real estate broker and a building owner in which the owner promises to pay a fee or commission to the broker if specified real property is sold or leased during a stated period. The broker may or may not be the cause of the sale or lease.
Expense Stop:
Provision in a lease establishing the maximum level of operating expense(s) to be paid by the landlord. Expenses beyond this level are to be reimbursed by the tenant. May be applied to specific expenses only (e.g., property taxes or insurance).
Face Rental Rate:
The "asking" or nominal rental rate published by the landlord.
Feasibility Study:
An analysis of needs, costs of recommended improvements, and anticipated revenue and costs; establishes the basis for construction of an individual improvement or a complete system.
First Refusal Right:
A clause occasionally inserted in a lease that gives a tenant the first opportunity to buy a property if the owner decides to sell. The owner must have a legitimate offer which the tenant can match or refuse.
Fixed Costs:
Costs, such as rent, which do not fluctuate in proportion to the level of sales or production.
Floor/Area Ratio (FAR):
The ratio of the bulk area of a building to the land on which it is situated. Calculated by dividing the total square footage in the building by the square footage of land area.
Force Majeure:
A force that cannot be controlled or resisted. In other words, something beyond the control of the parties involved. Includes acts of God (e.g., flood, tornadoes, etc.) and acts of man (e.g., riots, strikes, arsons, etc.).
Full Service Rent:
A rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increases in operating expenses over the base year amount. See also: "Pass Throughs."
Functional Design:
Design of a structure or facility that increases its overall efficiency and provides maximum user acceptance; a parking concept plan showing traffic flow, stall geometry, and other features that determine the interior design of parking facilities.
Future Proposed Space:
Commercial space in proposed development projects which either have not started construction or set a construction start date. Future Proposed projects include all those waiting for a lead tenant, financing, zoning, approvals or any other event necessary to begin construction. Also may refer to the future phases of a multi-phase project that have not yet been built.
General Contractor:
The party that contracts for the construction of an
entire building or project, rather than a portion of the work. The general
contractor hires subcontractors, (e.g., plumbing contractors, electrical
contractors, etc.), coordinates all work, and is responsible for payment to
the subcontractors.
Graduated Lease:
A lease, generally long term in nature, with varied rental
payments and usually based on periodic appraisal or simply the passage of
time.
Gross Absorption:
Absorption is a measure of the amount of office space
leased over a period of time. Gross absorption is a measure of the total
square feet leased over a period of time with no consideration for office
space vacated in the same area during the same period. See also "Net
Absorption."
Gross Building Area:
The total floor area in an office building measured in
square feet or square meters that is associated with that building's use as
office building. The area extends to the outer surface of exterior walls
and windows and includes office area, retail area, and other rentable areas
such as vending machine space and storage area, but excludes parking and
roof space.
Gross Lease:
A lease that provides that the landlord shall pay all expenses
of the leased property, such as taxes, insurance, maintenance, utilities,
etc.
Ground Lease:
A lease covering the use of land only, with the lease
sometimes secured by improvements installed by the tenant. Also called a
"Land Lease."
Ground Rent:
Rent paid for vacant unimproved property. If the property is
improved, ground rent is that portion of the total earnings attributable to
the land only.
Highest and Best Use:
The reasonably probable and legal use of vacant land
or an improved property, which is physically possible, appropriately
supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal
permissibility, physical possibility, financial feasibility and maximum
profitability.
High Rise:
A building higher than 25 stories above ground level.
Hold Over Tenant:
A tenant who retains possession after the expiration of a lease.
HVAC:
The acronym for Heating Ventilating and Air-Conditioning. Refers to
the equipment used to heat and cool a building.
Improvements:
Generally, the term refers to buildings, but may include any
permanent structure or other development, such as streets, utilities, etc.
See also "On-Site Improvements".
Indirect Costs:
Development costs other than direct material or direct
labor costs, including administrative and office expenses, financing costs
and property taxes.
Inventory:
When referring to a market of office or industrial space, the
total amount of rentable square feet of existing and delivered space in a
given category, for example, prime office space. Inventory refers to all
space within a certain proscribed market without regard to its availability
or condition, and can include both office and flex and warehouse space.
Landlord's Lien:
Several types of landlord's liens are created by contract
or statute. Some examples are: 1) a contractual landlord's lien; 2)
statutory landlord's lien; 3) landlord's remedy of distress (or right of
distraint), which is not truly a lien but has a similar effect.
Landlord's Warrant:
A warrant enabling a landlord to levy upon a tenant's
personal property (e.g., furniture, etc.) and to sell this property at a
public sale to collect delinquent rents.
Lease:
An agreement whereby the owner of real property (i.e. landlord)
gives the right of possession to another (i.e. tenant) for a specified
period of time (i.e. term) and for a specified consideration (i.e. rent).
Lease Commencement Date:
The date on which beneficial occupancy commences
and the legal terms of the lease go into effect.
Leasehold Improvements:
Improvements made to leases premises by a tenant. See also "Tenant Improvements;" "Workletter."
Leasing Activity:
The sum of all completed transactions in a given period of time, including sublet space and pre-leasing but excluding renewals.
Letter of Intent:
A formal method through which a prospective developer,
buyer or tenant expresses his/her interest in property. Depending on the
language, a legal obligation may be created.
Listing Agreement:
An agreement between a real state broker and the
property owner which authorizes the broker to assist in the sale or lease of the property in return for a fee, commission or other form of compensation. See also: "Exclusive Listing Agreement."
Long Term Lease:
A lease whose term exceeds ten years from initial signing
until the date of expiration or renewal option.
Lot:
A parcel of land, generally part of a series of parcels which make up
a subdivision, the boundaries of which are created and shown on a "plat."
Low Rise:
A building with fewer than seven stories above ground level.
Market Indicators:
Statistical measures of construction and real estate activity, including issued permits, indices of building costs, deeds recorded and homes for sale.
Market Price:
The price a property brings in a given market. Commonly used interchangeably with market value, although not truly the same. See also "Market Value."
Market Study:
A forecast of future demand for a type of project along with
recommendations as to the quantity to be sold or leased and prices to be
charged. Also called "Marketability Study."
Market Rent:
The rental income that a property would most probably command on the open market; indicated by current rents paid and asked for comparable space as of the date of appraisal.
Master Lease:
A primary lease that controls subsequent leases and which may cover more property than subsequent leases.
Master Plan:
(1) A zoning plan for an entire governmental subdivision,
(e.g., a city). A comprehensive plan to allow a city to grow in an orderly
manner, both economically and ecologically.
(2) a developer's plan for a multi-phase office park or multi-use development that takes into account all proposed or projected uses, improvements and amenities.
Mid-Rise:
A building between seven and 25 stories above ground level.
Mixed-Use:
Space within a building or project provided for more than one
use (e.g., an apartment building with office space, a hotel with office
space, or a retail establishment with apartments).
Net Absorption:
Absorption is a measure of the amount of office space
leased over a period of time. Net absorption is a measure of the total
square feet leased over a period of time taking into consideration office
space vacated in the same area during the same period. See also "Gross
Absorption."
Net Lease:
A lease in which the tenant pays, in addition to rent, certain
costs associated with a leased property, including property taxes,
insurance premiums, repairs, utilities, and maintenance. There are also
"net-net' (double net) and "net-net-net" (triple net) leases, depending
upon the degree to which the tenant is responsible for operating costs.
See also "Gross Lease".
Net Rentable Area:
Floor area of a building less any vertical penetrations
of the floors. No deductions are made for necessary columns and
projections of the building. (BOMA Standard)
Non-CBD:
The area around a city. The "suburban" area.
Non-Competitive Space:
Space in office buildings which contain or are
intended to contain one office occupant so that the space is rarely if ever
available for lease or sublease.
Office/Flex Space:
A one- or two- story building with little or no common
areas, high ceilings, load bearing floors and loading dock facilities.
Usually configured to allow a small amount of office space in combination
with light assembly or warehouse/distribution uses.
Open Space:
The total area of land and/or water not improved by a building,
structure, street, road or parking area, or containing only such
improvements as are complementary, necessary or appropriate to the use and
enjoyment of the open area.
Operating Expenses:
The actual cost of operating income-producing property,
including utilities and similar day-to-day expenses, taxes, insurance and
reserves for the replacement of items that wear out.
Operating Cost Escalation:
Refers to the clause in a lease agreement used
to adjust rents over the term of a lease.
Overall Vacancy Rate:
Space, available both directly and through sublease, divided by the inventory. Space in properties under construction or under renovation is not included.
Parking Index:
Figure representing the number of parking spaces available
per 1,000 square feet of gross leasable area.
Pass Throughs:
Building and operating expenses that are paid by the tenant
under the terms of a lease.
PE:
Professional Engineer Building and operating expenses that are paid by
the tenant under the terms of a lease.
Percentage Lease:
A lease, generally on a retail business property, in
which the rent is calculated as a percentage of sales. There is usually a
minimum or "base" rent in the event of poor sales.
"Phantom" Space:
Generally refers to space that is under lease to a tenant
but not presently occupied. Usually created when a tenant consolidates or
reduces operations in space it leases prior to the end of its lease term. The vacant but leased space may or may not be formally marketed on a sublet basis or counted among a market's vacancy.
Planned Delivery Space:
Office space that is currently under construction or renovation and will be completed (delivered to the market) within two years. Does not include Proposed or Future Proposed Space.
Plat (Plat Map):
A map dividing a parcel of land into lots, as in a
subdivision.
Prelease:
A signed lease for space in a multi-tenant office building which
has not yet received a Certificate of Occupancy.
Prime Space:
First generation (new) space that is currently available for
lease but has never before been occupied by a tenant.
Prime Tenant:
The major tenant in a building, shopping center, etc.
Proposed:
Projects which are in the planning stages and may, or may not, have been approved. Construction has not yet begun.
Rehab:
A building undergoing extensive renovation in order to cure
obsolescence. Some rehab projects are so extensive that tenants may not be
in the building during the work period.
Renewal Option:
The right of a tenant to renew (i.e., extend the term of) a
lease for a stated period of time and rent at an amount that can be
determined.
Rent:
Consideration paid for the occupancy and use of real property. A
general term covering any consideration (not only money).
Rent Commencement Date:
The date on which a tenant begins paying rent. Depending on the nature of the marketplace, it may coincide with the lease commencement date or it may be several months after. It will never begin before the lease commencement date.
Rentable Square Feet:
Usable square feet plus a percentage (the core
factor) of the common areas on the floor, including hallways, bathrooms and
telephone closets. (And sometimes main lobbies.)
Rentable square footage is the number of square feet on which a tenant's
rent is based.
Rentable/Usable Ration:
The number resulting from dividing the Total
Rentable Area in a building by the Usable Area. The inverse of this ration
describes the proportion of space that an occupant can expect to utilize.
Rent-Up Period:
The period of time following construction of a new building when tenants are actively sought and the project is approaching stabilized occupancy.
Sale-Leaseback:
A financing arrangement in which a property owner sells all or part of the property to an investor and then leases it back. Although the lease actually follows the sale, both are agreed to as part of the same transaction.
Secondary Space:
Space that has been previously occupied and becomes available for lease. Includes both relet and sublet space.
Security Deposit:
Generally, a deposit of money by a tenant with a landlord to secure performance of a lease.
Setback:
The distance from a lot line or other reference point, within
which no structure may be located.
Setback Ordinance:
Part of a zoning ordinance that regulates the distance
from the lot line to the point where improvements may be constructed.
Site Analysis:
The study of a specified parcel of land (and the surrounding
area) to determine its suitability for a specific use.
Site Development:
All improvements made to a site before a building may be
constructed, such as grading, utility installation, etc.
Site Plan:
A detailed plan, to scale, depicting development of a parcel of
land and containing all information required by the zoning ordinance. See
also "Master Plan."
Slab:
The exposed wearing surface laid over the structural support beams of
a building.
Space Plan:
Sometimes called the preliminary plan. A graphic
representation of a tenant's office space requirements, showing wall and
door locations, room sizes and some furniture layouts.
Speculative Space:
Any prime space that has not been leased to a tenant
prior to commencing construction on a new building.
Step-Up Lease (Graded Lease):
A lease calling for set increases in rent at set intervals.
Straight Lease (Flat Lease):
A lease calling for the same amount of rent to
be paid periodically (usually monthly) for the entire term of the lease.
Subdivision Plat:
A detailed drawing, to scale, depicting division of a
parcel of land into two or more lots and containing engineering
considerations and other information required.
Sublease Space:
Space available through the lessee to a third party for the remainder of the lessee's term.
Survey:
The measurements of the boundaries of a parcel of land, its area
and sometimes topography.
Tenant:
(1) A holder of property under a lease.
(2) Originally, one who has the right to possession, irrespective of the title interest.
Tenant At Will:
One who holds possession of premises by permission of the
owner or landlord, but without agreement for a fixed term.
Tenant Improvement:
Improvements to land or buildings to meet the needs of
tenants. May be new improvements or remodeling, and may be paid for by the
landlord, the tenant, or shared. See also "Leasehold Improvements;"
"Workletter."
Total Inventory:
Total square footage of rentable office or industrial
space, vacant and occupied, ready for tenant finish. Includes
owner-occupied space.
Triple Net (NNN) Rent:
Rent stipulated in a lease in which the tenant
agrees to pay a share of the landlord's operating expenses or real estate
taxes for the buildings proportionate to the amount of space it occupies.
See also "Full Service Rent."
Turn Key Project:
A project in which the developer is responsible for the
total completion of a building (including interior design and construction)
or demised premises to the customized requirements of a future owner or
tenant.
Under Construction:
Planned building for which construction has started but
have not yet been granted a Certificate of Occupancy. Planned buildings
are not included.
Use:
Specific purpose for which a parcel of land or a building is designed,
arranged, intended, occupied or maintained.
Vacancy Factor:
The amount of gross revenue lost because of vacant space; an allowance item on pro forma income statements, usually calculated as a percentage of gross revenue.
Vacancy Rate:
A measurement expressed as a percentage of the total amount
of available space compared to the total inventory of space. Computed by
multiplying vacant space times 100 and divided by total inventory.
Vacant Space:
Existing space which is currently being marketed for sale or
lease, excluding sublet space.
Wear and Tear:
The deterioration or loss in value caused by the tenant's
normal and responsible use. In many leases the tenant is not responsible
for "normal wear and tear."
Weighted Average Rental Rates:
Rental rates averaged to the amount of space
available in each building per market area.
Workletter:
The standard building items that the landlord contributes as
part of tenant improvements. Examples of standard building items are:
doors, partitions, lights, floor covering, telephone outlets, etc. The
workletter may specify the quantity and quality of the materials to be used
and often carries a dollar value.
Working Drawings:
The set of plans for a project that, in combination with
a set of specifications, comprise the contract documents indicating the
exact manner in which a project should be built. See also "Contract
Documents."
*These terms have been reprinted with permission from Black's Guide.
