Real Estate Definitions – Part 3 – I to M

Here is part 3 of my new blog series with definitions and terminologies used in ICI Real Estate. View the previous posts here and here, and stay tuned for more next week.

In-line Store – A retail store placed adjacent to neighboring retailers so that the fronts of the stores are in a straight line and behind what is considered the lease line. Tenants operating in the common area are not considered in-line vendors.

Incubator – An economic development tool created to support new businesses. Typically lab or office space or both provided for free or at a deep discount in buildings owned or leased by municipalities. Business assistance and financing opportunities may be provided as startups gain momentum.

Industrial Building – A structure used primarily for manufacturing, research and development, production, maintenance, and storage or distribution of goods or both. It can include some office space. Industrial buildings are divided into three primary classifications: manufacturing, warehouse or distribution, and flex. (The typical characteristics of the most common types of industrial buildings are shown in the Industrial Building Types Matrix.)

Infill – Infill is the development of one or more buildings on underutilized land situated between existing buildings. Infill development is typically done in dense environments where land is scarce. The slightly broader term “land-recycling” is sometimes used.

Innovation Center or District – Geographic areas with concentrations of innovative firms and entrepreneurial activity that focus on strengthening and growing new businesses and commercializing their products or services or both.

Internal Rate of Return (IRR) – For income properties, it is the interest or discount rate needed to discount the sum of future net cash flows, including amortization and payments of loans and depreciation of the real property, to an amount equal to the initial equity of the property. For development projects, it is the interest or discount rate needed to convert (or discount or reduce) the sum of the development expenditures and incomes to equal zero.

Kiosk – A small, physically independent stand or cart often placed within the common area of a retail structure (typically a regional mall) from which specialty goods are sold.

Leased Space – Space under contract between a landlord and a tenant or between a tenant and a subtenant.

Leasehold – A leasehold is an ownership structure in which a temporary right to use land has been granted by the landowner to another party. (See ground lease.) Although the tenants do not own the land, they are able to improve the land and operate it as stipulated in the ground lease for the term of the lease.

Leasing Activity – Leasing activity is a term that refers to the number of leases signed or square footage committed to over a specified period without regard to occupancy. Typically, leases are executed many months before a tenant occupies the space. This arrangement means that a lease can be executed in a given quarter, but the space commitment will not show up in the absorption figures until the space is occupied at some point in the future. Leasing activity includes direct leases, subleases and expansions of existing leases. Leasing activity also includes any preleasing activity in buildings that are under construction, are planned or are under renovation. (Synonym: gross absorption)

LEED® or Leadership in Energy and Environmental Design – LEED is a third-party certificate program under the U.S. Green Building Council (USGBC). It is a nationally accepted benchmark for the design, construction and operation of high-performance sustainable buildings. Certificate levels are as follows: Certified, Silver, Gold or Platinum. The levels are based on points obtained in six areas: sustainable sites, water efficiency, energy and atmosphere, material and resources, indoor environmental quality, and innovation in design.

Less than Truckload or Less than Load (LTL) Shipping – LTL is the transportation of lightweight freight or smaller groupings of freight. LTL shipments typically weigh between 151 and 20,000 lbs. LTL carriers collect freight from various shippers and consolidate that freight onto enclosed trailers for line haul (the movement of cargo between two major cities or ports) to the delivering terminal or to a hub terminal.

Letter of Intent (LOI) – A letter of intent is an agreement(s) between two or more parties before an actual agreement, such as a lease, is finalized. It is similar to a term sheet or memorandum of understanding (MOU). While LOIs may not be binding, provisions of them can be, e.g., non-disclosure and exclusivity. The intent is to protect both parties in the transaction until the transaction is executed.

Leveler – Steel plates that are moved by auto-hydraulic lifts to make a loading dock level with a truck bed. A fully loaded truck may sit 4 to 6 inches lower than a standard 48-inch-high dock. The device is used to account for the difference so a forklift can be driven into and out of a truck. A building equipped with multiple loading docks may not have a leveler for each dock.

Lifestyle Center – A type of retail property in an urban-like or Main Street setting with pedestrian circulation in the core and with vehicular circulation along the perimeter. Tenants are typically upscale, national-chain specialty stores, restaurants and theaters. (See Retail Building Types Matrix.)

Load Factor or Core Factor – The load factor is calculated by dividing the rentable building area (RBA) by the usable area. This factor can then be applied to the usable area to convert it to RBA for comparison. In markets were space is leased on the basis of the usable area, if the load factor is 15 percent, then the usable area can be multiplied by 1.15, resulting in the RBA. (Synonym: add-on factor)

Loading Dock – An elevated platform at the shipping or delivery door of a building; it is usually situated at the same height as the floor of a shipping container on a truck or railroad car to facilitate loading and unloading. Loading docks can be exterior ramps that protrude from a building and that are covered with a canopy or some element to protect the loading area from the elements. Otherwise, they can be flush with the exterior of the building and accessed through a sliding door that is adjacent to the interior of the building.

Loan to Value Ratio (LTV) – The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage.

Locker – A storage compartment that enables a purchaser to pick up merchandise at a convenient satellite location. This arrangement allows for a type of self-service parcel delivery. Customers can select any locker location as their delivery address and can retrieve orders at that location by entering a unique pickup code on the locker touchscreen.

M-commerce – Mobile commerce is buying and selling via non-tethered devices such as smartphones and smart tablets.

Manufacturing Building – A facility used for the conversion, fabrication or assembly of raw or partly wrought materials into products or goods. (Typical characteristics are shown in the Industrial Building Types Matrix.)

Market and Submarket – In commercial real estate (CRE), the terms “market” and “submarket” have many characteristics.

  1. Hierarchy: In terms of geographic hierarchy, a region is made up of markets, and a market is made up of submarkets.
  2. Boundaries: Markets and submarkets have generally accepted geographic boundaries that do not overlap. They are most commonly bound by streets, roads and natural features such as parks and rivers, which clearly indicate where one market or submarket ends and another begins.
  3. Purpose: Markets and submarkets are the foundation upon which analysts track real estate fundamentals such as vacancy, absorption, rents and construction activity.
  4. Markets and submarkets are further broken down by total buildings and by total square footage in those buildings.
  5. Product types: Office and industrial product types may share generally accepted market or submarket boundaries because in the United States, office space tends to be clustered together as does industrial space. However, there may also be separate and distinct boundaries for each respective property type. Suburban retail is more closely tied to residential and, therefore, is dispersed across large geographic areas, whereas urban retail is typically clustered in specific areas or on specific streets.

Master Lease – The controlling lease identifying the terms and length of the lease. Note that a sublease cannot extend beyond the term of the master lease. (See Common Lease Types Matrix.)

Medical Office Building (MOB) – A structure with at least 75 percent of its interior built out to accommodate healthcare providers such as doctors and dentists or healthcare technicians who perform exams with specialized equipment. Typically, the buildings have more robust mechanical, electrical and plumbing systems as well as reinforced floors to accommodate numerous exam rooms and heavy medical equipment.

Mezzanine Office – Office space that is built in an industrial facility. It is usually along the perimeter of a facility and creates an intermediate floor.

Mixed-use Development (MXD) – The grouping of multiple significant uses within a single site or building such as retail, office, residential or lodging facilities. Examples include office buildings that contain ground-level retail and housing, plus projects that have separate office, retail and multifamily properties. Clustering of at least three different uses such as office, retail, residential and/or hotel adjacent to or in close walkable proximity to one another. Uses can be contained in the same building or dispersed in different buildings that are adjacent to or close to one another.

Modified Lease – A lease in which the landlord receives a stipulated rent, and payment of the property’s operating expenses is divided between the lessor and lessee via specified terms in the lease; also called “Modified Gross,” “Net-net” (Double Net), “Net-net-net” (Triple Net), etc., depending on the degree to which the tenant or landlord are responsible for operating costs. (See Common Lease Types Matrix.)

Multitenant Office Building – A building that is not owner occupied and space that is leased to two or more tenants.