Real Estate Terms & Definitions
The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet.
The total amount of space that is currently being marketed as available for lease or sale in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date.
Improvements that have been constructed to the specific desires and specifications of a particular owner or tenant (Custom Building). Typically a developer owns the land; they will enter into contract with a buyer, build the building to the buyer’s specs, and then sell the buyer the land and building. Often the user is a tenant on a long-term lease and the leased fee position is sold to an investor.
The individual, group, company or entity that has purchased a commercial real estate asset.
Short for capitalization rate. The cap rate is a calculation that reflects the relationship between one year’s net operating income and the current market value of a particular property. The cap rate is calculated by dividing the annual net operating inclome by the sales price (or asking price).
Abbreviation for the Central Business District. (See also; Central Business District).
Central Business District
The designations of Central Business District (CBD) and suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA (Metropolitan Statistical Area).
Class A Office
In general, a class A building is an extremely desirable investment-grade property with the highest quality construction and workmanship, materials and systems, significant architectural features, the highest quality/expensive finish and trim, abundant amenities, first rate maintenance and management; usually occupied by prestigious tenants with above average rental rates and in an excellent location with exceptional accessibility. They are most eagerly sought by international and national investors willing to pay a premium for quality and are often designed by architects whose names are immediately recognizable. A building meeting this criteria is often considered to be a landmark, either historical, architectural or both. It may have been built within the last 5-10 years, but if it is older, it has been renovated to maintain its status and provide its many amenities. Buildings of this stature can be one-of-a-kind with unique shape and floor plans, notable architectural design, excellent and possibly outsaanding location and a definite market presence.
Class B Office
In general, a class B building offers more utilitarian space without special attractions. It will typically have ordinary architectural design and structural features, with average interior finish, systems, and floor plans, adequate systems and overall condition. It will typically not have the abundant amenities and location that a class A building will have. This is generally considered to be more of a speculative investment. The maintenance, management and tenants are average to good, although, class B buildings are less appealing to tenants and may be deficient in a number of respects including floor plans, condition and facilities. They therefore attract a wide range of users with average rents. They lack prestige and must depend chiefly on lower price to attract tenants and investors. Typical investors are some national but mostly local.
Class C Office
In general, a class C building is a no-frills, older building that offers basic space. The property has below-average maintenance and management, mixed or low tenant prestige, and inferior elevators and mechanical/electrical systems. As with Class B buildings, they lack prestige and must depend chiefly on lower price to attract tenants and investors.
Buildings that began construction during a specific period of time.
In general: Space within a building that is, or is able to be joined together into a single block of space.
Contiguous in Building:
Two or more blocks of available space located on vertically adjoining floors. This includes two or more full floors or a full floor with a vertically adjoining half floor.
Contiguous on Floor:
Two or more spaces on the same floor that are actually touching, which can be combined into a single block of useable space.
Deliveries Buildings that complete construction during a specified period of time. In order for space to be delivered, a certificate of occupancy must have been issued for the property.
The date a building completes construction and receives a certificate of occupancy.
One who transforms raw land to improved property by use of labor, capital, and entrepreneur efforts.
Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. See also: Space Type
Existing inventory refers to the total square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space that is either planned, or under construction.
A type of building(s) designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. At least half of the rentable area of the building must be used as office space. Flex buildings typically have ceiling heights under 18′, with light industrial zoning. Flex buildings have also been called Incubator, Tech and Showroom buildings in markets throughout the country.
Full Service Lease Rate
AKA Gross or Full Service Gross – a rental rate that includes normal building standard services which are provided and paid by the landlord.
For existing buildings, the measure of total square feet occupied (indicated as a Move-In) over a given period of time with no consideration for space vacated during the same time period. Sublet space and lease renewals are not factored into gross absorption. However, in a lease renewal that includes the leasing of additional space, that additional space is counted in gross absorption. Preleasing of space in non-existing buildings (Planned, Under Construction or Under Renovation) is not counted in gross absorption until actual move in, which by definition may not be any earlier than the delivery date.
Growth in Inventory
The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new building(s).
A type of building(s) adapted for a combination of uses such as assemblage, processing, and/or manufacturing products from raw materials or fabricated parts. Additional uses for an industrial property include warehousing, distribution, and maintenance facilities.
(Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep.
Leased space refers to all the space that currently has a financial lease obligation on it. It includes all leased space, regardless of whether the space is currently occupied or not. For example, a sublease opportunity, where the company has moved out of the space but is still paying rent on it, is counted in the leased space totals.
Leasing activity refers to the volume of square footage that is committed to and actually signed in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in under construction, planned buildings or under renovation buildings.
Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set areas. Markets are building-type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire region (See also, Region). Markets can be further subdivided into Submarkets. (See also; Submarkets).
Buildings that house more than one tenant at a given time. Usually, multi-tenant building were designed and built to accommodate many different floor plans and design for different tenant needs. (See also; Tenancy)
For existing buildings, the measure of total square feet occupied (indicated as a Move-In) less the total space vacated (indicated as a Move-Out) over a given period of time. Sublet space and lease renewals are not factored into net absorption. However, in a lease renewal that includes the leasing of additional space, that additional space is counted in net absorption. Pre-leasing of space in non-existing buildings (Planned, Under Construction or Under Renovation) is not counted in net absorption until actual move in, which by definition may not be any earlier than the delivery date.
Net Rental Rate
A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs.
New (or Shell) Space
Sometimes called first generation space, refers to a space that has never been occupied and/or leased by a tenant.
Occupied space is defined as the square footage of space that is physically occupied by a tenant. It does not include space that is under a lease obligation, where the tenant does not actually occupy the space.
A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail, sales, financial, or restaurant, usually on the ground floor.
The company, entity, or individual that holds title on a given building or property.
Planned / Proposed space refers to space that has been announced for future development, but has not yet started the construction phase of development (that is, has not broken ground yet). Costar enters a record for a proposed building once the projected building size is known.
Preleased space refers to the amount of space in a building that has been leased prior to its construction completion, or its certificate of occupancy.
Price Per Square Foot
(Improved Properties) The sale price divided by the rentable square feet of the building.
The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as elevators, HVAC, and electrical systems, are functioning properly.
Quoted Rental Rate
The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rate may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease.
Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets)
Space that was previously built out or occupied, but the lease has expired and the building owner is releasing it.
Rentable Building Area
(AKA RBA) Expressed in square feet, this area includes the usable area and its associated share of the common areas. Typically rents are based on this area. It is the space the tenant will occupy in addition to the associated common areas of the building such as the lobby, hallways, bathrooms, equipment rooms, etc. There is no real difference between RBA and GLA (Gross Leasable Area) except that GLA is used when referring to retail properties while RBA is used for other commercial properties.
The annual costs of occupancy for a particular space quoted on a square foot basis.
The total dollar amount paid for a particular property at a particular point in time.
The sum of sales prices for a given group of buildings in a given time period.
The individual, group, company, or entity that sells a particular commercial real estate asset.
Abbreviation for Square Feet.
Building that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-Suite and Tenancy)
Space that has been leased by a tenant and is and being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space.
Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependant on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic destination having a cumulative sum that matched the boundaries of the Market they are located within (See also Market).
The suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office and inventory not located in the CBD. (See also: CBD)
A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant)
Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interest of the tenant is referred to as a Tenant Rep Broker.
Time on Market
A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied.
Status of the building in the process of being developed, assembled, built or constructed. A building is considered to be under construction after is has begun construction and until it receives a certificate of occupancy.
A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations.
Space that is not currently occupied by a tenant regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space.
Weighted Average Rental Rate
Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the results numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces.
The year in which a building completed construction and was issued a certificate of occupancy.
Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied.