Neighborhood Shopping Center – This type of retail property is most commonly found in the United States. Anchored by supermarkets and drug stores, the centers are typically one-level, rectangular structures with surface parking in the front and merchandise loading areas in the back. They provide for the sale of convenience goods (food, drugs, etc.) and personal services (laundry, dry cleaning, etc.) for the day-to-day living needs of the immediate neighborhood. (See Retail Building Types Matrix.)
Net Absorption – The net change in occupied space over a specified period of time. This change is measured in square feet at the building, submarket and market levels. This figure reflects the amount of space occupied as well as the amount of space vacated. Net absorption can be either positive or negative and must reflect increases and decreases in inventory levels.
Net Cash Flow – Net cash flow is the annual income produced by an investment property after deducting allowances for capital repairs, leasing commissions, tenant inducements (after the initial lease is up) and debt service from net operating income.
Net Lease – A lease in which the tenant pays a share of operating expenses in addition to the stipulated rent. Disclosure of the specific expenses to be paid directly by the tenant is required. (See Common Lease Types Matrix.)
Net Operating Income (NOI) – The income generated after deducting operating expenses but before deducting taxes and financing expenses.
New Space – Space delivered to the market that was never previously leased or occupied by a tenant.
Occupancy Cost – Includes rent, real estate and personal property taxes, plus insurance, depreciation and amortization expenses.
Occupied Space – Space that is physically occupied by a tenant, subtenant or owner. Occupied space is calculated by subtracting total vacant space from total competitive inventory. If subtenant space is excluded from the calculation, then the term “direct occupied space” is recommended.
Office Building – A structure providing environments that are conducive to the performance of management and administrative activities, accounting, marketing, information processing, consulting, human resources management, financial and insurance services, educational and medical services, and other professional services. At least 75 percent of the interior space is finished to accommodate office users, but the rest of the space can include other uses such as retail, restaurant or fitness.
Office Building Types and Sizes
Low-rise: Fewer than 7 stories above ground level
Mid-rise: Between 7 and 25 stories above ground level
High-rise: More than 25 stories above ground level
Office Condo – Short for “office condominium,” this term refers to the ownership structure of an office property in which individual units housed in one structure are sold to independent owners. Typically, there are covenants that govern the activities that can be carried out in and improvements that can be made to each unit. Such covenants also stipulate the distribution of costs related to the maintenance and operations of common elements in the building such as the roof and the elevators.
Office Park or Office Campus – Contiguous acres of land, master-planned with roads, sidewalks and trails, and extensive landscaping that accommodate stand-alone office buildings with adjacent surface parking lots or parking structures.
Office Percentage – The percentage of total square feet in an industrial building that is built for use as office space. When the mezzanine office is built above a space that would otherwise be an industrial work area, this additional square footage is not counted in the total square footage of the building.
Omnichannel Retail – The merging of online and brick-and-mortar retail operations so customers can purchase and return items via more than one “channel.” For example, they can buy online and return in store (BORIS), buy online and pick up in store (BOPIS), buy online and pick up at a locker, etc. (Synonym: Multichannel Retail)
Online or Pure Play Retailer – A retailer that sells exclusively online and does not have any brick-and-mortar retail locations.
Opportunistic Investment – Ground-up development of a real estate project is considered an opportunistic investment. It is an investment in a parcel or site that typically involves some or all of the following: rezoning for use or density or both; net new or ground-up construction; conversion of a building from one use to another; complete gut or significant rehab of a building, requiring that it be entirely vacant to complete; introduction of uses not previously seen on this parcel or in this area; etc.
Owner Occupied Building – Buildings that are occupied by the owner and that generally are not included in the competitive inventory.
Pop-up Retail – A retail store, restaurant or kiosk intentionally designed to be in a location for a finite amount of time (i.e., a restaurant that opens for six months so it can test a market, or a store that operates in a location during the holiday season only).
Power Center – Among the largest types of retail properties, they typically feature three or more big box retailers such as Home Depot, Target and Walmart. Various smaller retailers are usually clustered together in a community shopping center configuration. Power centers are typically made up of multiple large buildings that are one-level, rectangular structures with surface parking in the front and merchandise loading areas in the back. Often, more money is spent on features and architecture at these locations than at big box shopping centers. (See Retail Building Types Matrix.)
Preleased Space – The term applies to space that has been leased in a building that is under construction.
Pro Rata Share – The percentage that, when multiplied by reimbursable expenses (less an expense stop if referring to a gross lease), equals the amount to be reimbursed by a tenant to the landlord for expense recoveries. Typically, the percentage is calculated by dividing the net rentable area of a tenant’s leased premises by the net rentable area of the building, although this is not always the case.
Proposed or Planned – A building that has received zoning approval but has not yet started construction.
Push-back Rack – Racking system with a sliding device that pushes back pallets, thereby allowing multiple pallets to be placed in the same location.
Radio Frequency Identification (RFID) – Inventory-tracking technology embedded in devices that are attached to labels on packages so an item’s location can be tracked.
Rail Door – A door that is generally side-loading, that has access to railroad tracks, and that facilitates the loading or unloading of goods from a railroad car to an industrial building.
Rail Service – A railroad spur adjacent to a building structure that allows the building to be served by rail operations.
Ramp Door – A dock-high door that has been converted to a drive-in door by creating a ramp from ground level to dock level.
Real Estate Investment Trust (REIT) – A REIT is a company that owns or finances income-producing assets, such as apartments, shopping centers, offices and warehouses. It may also invest in air or water rights, unharvested crops, permanent structures and structural components that are part of a structure but don’t themselves produce income. Shares of REITs can be traded like stocks and can allow owners of the shares to participate in the real estate market.
Real Estate Owned (REO) – A sale in which a lender, either institutional or private, sells a property that the lender has taken back through foreclosure.
Recapitalization – A term used when owners liquidate some or most of their ownership position in an asset by selling some or most of their equity position.
Redevelopment – A building or site that involves teardown and rebuilding of most—if not all— structures on that site. This change typically occurs in sought-after areas that are usually well located, where buildings have become unattractive or obsolete or where there is a demand for different uses.
Regional Shopping Center – Among the largest types of retail properties, the center typically features large anchor tenants that sell general merchandise and fashion. Regional shopping centers were historically configured like traditional suburban malls, but many have evolved to Town Center or Main Street retail formats. Parking is accommodated via surface or structure spaces or both. (See Retail Building Types Matrix.)
Relet Space – Sometimes called “second-generation space,” it refers to existing space that was previously occupied by a tenant.
Renewal Option – The right of a tenant to extend the lease term for a specified period of time at a predefined rental rate. In many instances, the rate is defined as a percentage of market rent, and in other instances, the rate is a specified dollar amount. An auto-renewal option is a type of renewal option whereby the lease term is extended automatically on the expiration date without any notification requirement. Often, there is a date by which this option must be executed; otherwise, the option expires.
Renovation – Upgrading and modernizing common areas in a building such as lobbies, bathrooms, parking areas, etc. The tenant remains in the building, and the building use and square footage do not change. Renovation is often done together with a retrofit.
Rentable Building Area (RBA) – The total square footage of a building that can be occupied by or assigned to a tenant for the purpose of determining a tenant’s total rental obligation. Generally, RBA includes common areas in the building including hallways, lobbies, bathrooms and phone/data closets. (Synonym: gross building area)
Retail Flagship – Flagship stores serve as retailers’ main stores and are aimed at serving large numbers of customers. They are found in prominent shopping districts (e.g., Madison Avenue, Savile Row) and target high-income shoppers. They are typically larger than outlet or mall stores and hold large volumes of merchandise. A retailer’s primary location, a store in a prominent location, a chain’s largest store, the store that holds or sells the highest volume of merchandise, or a retailer’s best known location.
Retrofit – Modernization of building systems such as heating, ventilation and air conditioning (HVAC); security; fire alarms; and energy management. The tenant remains in the building, and the building use and square footage do not change. Retrofit is often done together with a renovation.
Return on Investment (ROI) – A measure of the value created by a real estate investment. It is the difference between the net gains from investing in the property less the net cost from investing in the property divided by the purchase price of the property. Usually, it is reported as a percentage.