Guidance for The Movement in the Real Estate Market


Definition and Vocabulary for Tenants:

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Annual Operating Budget:
The property’s annual budget to maintain and market the property. It is a line by line report that details expenses and categorizes the expenses into individual line items.

Annual Debt Service:
This is the amount paid to service the debt on the property; the total of the sum of all annual loan payments.

Architectural Drawings:
Final construction drawings including floor plan, electrical plans, mechanical plans, reflective plan, ceiling plans, and finish specifications. Prepared by an architect or an interior designer, payment of services is typically addressed in the work letter.

Markets influence, any measure for determining the present or future value of an income stream in a capitalization technique.

Competitive Advantage:
Is gained by promoting the features of the property that set it apart from its competitors. It is important to differentiate the property from its competitors by emphasizing what benefits or advantages the building has over its competitors.

Construction Budget:
Costs to construct the tenant improvements, which will include space plan design, architectural drawings, permits & fees, materials, labor, and construction management fee.

Floor Common Area:
The interior floor building area which includes such items as bathrooms, janitorial closets, electrical rooms, elevators, and common area lobbies.

Gross Square Footage:
The area bounded by the partition walls, plus the unit’s percentage interest of the building's common area which include bathrooms, electrical rooms, hallways, elevators, and any other common area space. This is the square footage that the property is rented at.

Guaranty of Lease:
The owner is promised that, in case of tenant default, the rent will be paid and the tenant’s other obligations under the lease will be performed.

Income Capitalization Approach:
Applies to the market derived  capitalization rate ("cap")  rate to the NOI of the subject property to determine value. This approach may be used to estimate both current and future values.

Indemnity Agreement:
The obligations resting on one party to make good any loss another party has incurred; to hold harmless from the damages or injuries occurring on the property.

Lease Types

Full Service:
A lease in which the tenant pays a fixed amount and the landlord is responsible for paying all other property expenses which would include such items as operating expenses, taxes, utilities, etc;.

A lease in which the tenant pays a fixed rent; the landlord is responsible for paying all property expenses. Utilities and telecommunication are tenant responsibilities.

Net Lease:
(N) A lease in which the tenant pays a pro-rated share of some or all operating expenses and taxes in addition to the base rent. The operating expenses are referred to as Pass through Charges. (There are also double net (NN) and triple net leases (NNN) each require tenant to pay additional operating expenses)

Load Factor:
Is used to charge the tenant a percentage of the common areas, so that the total leased is equal to the floor rental area.

Marketing Analysis:
Is a specific evaluation of the competition and the property’s position in the market place based on comparison to similar properties. The information that is analyzed determines the rental rates that will maximize occupancy levels and income for the property.

Marketing Plan:
Is used to advertise and relay information about the property for the purpose of attracting tenants. It should always be a reflection of the owner’s goals and objectives for the property.

Marketing Budget:
Specifies the money that will be allocated for each activity that is related to marketing the property. These costs may include: signage, print advertising, production of brochures, internet listings, etc.

Pass-through Expenses:
A property’s operating cost that becomes the responsibility of tenant based on the type of Lease that they signed.

Property Analysis:
The examination of the subject property as well as comparable properties in the market area. General site factors include location, accessibility, age, physical condition, and common areas.

Property Information Packet:
contains detailed information about the property, which would include maintenance logs, rent roll, operating budgets, floor plans, and photos of the property. These are the items that the listing agent will need to market your property for sale or for lease.

Property Type

Medical Office:
Buildings who are mainly occupied by medical and dental professionals, and must be designed to meet the needs of these occupants needs include, specialized plumbing and electrical needs and disposal of hazard materials.

Mixed Use Developments:
Combine at least three different revenue generating uses in a fully integrated way. While a MDX can some time result in the highest and best use of land, leasing in these buildings require a greater degree of complexity.

Usually single story structures in high traffic areas with above average signage standards; these properties have higher parking ratios than other properties. The may contain more general improvements than other properties, properties can typically include insulation, sheet rock, and HVAC system.

Is built as single story structures, often located in office parks. These properties have no common area lobbies and usually roll up doors as their back entrance. Possible tenants include: telecommunication companies, HVAC companies and internet.

(“Marco Market”) is the market area in which the changes in economic conditions are likely to affect the fiscal performance of a particular building.

Space Plan:
It is the process of determining the amount of space the tenant will need by providing a working drawing that depicts how the people and furniture will fit into the unit. Payment of this item as well as architectural drawings needs to be addressed in a lease. Leasing companies generally oversee the space planning process, typically space planners are hired by landlord or tenant.

Scope of Work:
A written summary, in general terms, of the work that is to be completed. It can include information about the materials and finishes of the tenant improvements.

Tenant Improvements:
Building improvements needed to a space when a new occupant takes possession of the property. Improvements are based upon the architectural drawings approved by the occupant and landlord.

Tenant improvement Allowance:
The amount of money the tenant is granted by the owner to spend on tenant improvements, usually expressed as a dollar amount per square foot.

Useable Square Footage:
The area bounded by the partitions that separate one’s tenant space from another, often referred to as carpet area.