Industry Terms and Definitions

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Cantilever Rack
Racking system containing shelving supports that are connected to vertical supports at the rear of the rack. This type of rack is used for storing long material such as lumber and piping.
Capital Expenses or Cap Ex
Improvements (as opposed to repairs) to a fixed asset that will increase the value or useful life of that asset. A capital expenditure is typically amortized or depreciated over the useful life of the asset, as opposed to a repair, which is expensed in the year incurred.
Capitalization Rate or Cap Rate
Unlevered initial return from the acquisition of a real estate asset calculated by dividing net operating income (NOI) by the property sales price. For example, a property’s capitalization rate (cap rate) is 10 percent if it is purchased for $10 million and produces $1 million in NOI during one year. The cap rate is typically calculated using the NOI generated in the first year of ownership so investors can normalize and compare potential returns among competing investment properties.
Ceiling Height
Distance from the floor to the inside overhead upper surface of the room. This measure will be higher than any hanging objects, beams, joists or trusses, unless there is a suspended ceiling.
Class A Building
A classification used to describe an office building with rents in the top 30 to 40 percent of the marketplace. Class A buildings are well-located in major employment centers and typically have good transit, vehicular and pedestrian access. Additionally, they are located adjacent to or in proximity to a high number of retail establishments and business-oriented or fast casual restaurants. Building services are characterized by above-average upkeep and management.
Class B Building
A classification used to describe an office building with rents that are based between those of Class A and Class C buildings. Class B buildings are in good to fair locations in major employment centers and have good to fair transit, vehicular and pedestrian access. They are located adjacent to or in proximity to a moderate number of retail establishments and business-oriented or fast casual restaurants. Building services are characterized by average upkeep and management.
Class C Building
A classification used to describe an office building with rents in the bottom 10 to 20 percent of the marketplace. Class C buildings are in less-desirable locations relative to the needs of major tenant sectors in the marketplace. They can be older, neglected buildings in good locations or moderate-level buildings in poor locations, so transit, vehicular and pedestrian access may vary. Typically, fewer amenities and restaurants are found in or near these buildings, and they are usually of moderate to low quality. Building services are characterized by below-average upkeep and management.
Clear Height
Distance from the floor to the lowest-hanging ceiling member or hanging objects, beams, joists or truss work descending down into a substantial portion of the industrial work area. This is the most important measure of the interior height of an industrial building because it defines the minimum height of usable space within the structure. (Synonyms: clear headway, clearance)
Clear Span
An open area with no obstructions.
A clause in a retail tenant’s lease that provides remedies to a tenant in the event that another tenant, typically an anchor or major tenant, ceases its operations at the property.
Column Spacing
The distance between posts or vertical supporting beams in a building.
Commercial Mortgage-backed Securities (CMBS)
CMBS are a type of bond that is commonly issued in U.S. securities markets and is backed by the cash flow from a pool of mortgages on commercial properties. The CMBS are often arranged into groups or “tranches” according to geography, property type or underlying credit rating.
Common Area
The generally accessible areas found on each floor of an office building such as washrooms, janitorial closets, electrical rooms, telephone rooms, mechanical rooms, elevator lobbies and public corridors that are available for use by all tenants on that floor. It does not include major vertical penetrations such as elevator shafts, stairways, equipment runs, etc., (identified as a percentage of rentable area).
Community Center or Community Shopping Center
A retail property with a wide range of apparel and general merchandise stores, as well as discount retailers or department stores such as Walmart, Kmart and Target. (See Retail Building Types Matrix.)
Competitive Inventory
Single-tenant and multi-tenant buildings typically consist of 10,000 square feet or more that are owned by one party and are made available for lease to another party. Owner-occupied and government-owned buildings are typically excluded from the competitive inventory. Note: It is important to note that data providers each have their own set of buildings that make up the competitive inventory in their foundational data set. Some include buildings larger than 20,000 square feet, while others include buildings as small as 5,000 square feet. Those modest differences in the competitive set can cause variations in metrics such as vacancy and absorption reported by each shop.
Competitive Set
A subset of total inventory that enables one to isolate and compare buildings on the basis of similar characteristics rather than simply by location. For example, a broker preparing to show available space to a tenant may identify five properties to be toured on the basis of location, square footage available, class, asking rent, parking ratio, etc. An investment sales or finance broker may generate a competitive set of buildings according to access to transit, year built, percentage leased, etc., to help estimate the value of an asset to be bought, sold or refinanced.
(See Delivered)
To secure a tenant when vacancy is high in a market or submarket, a landlord may need to grant concessions in the lease. Those concessions most often take the form of free rent but may also include lease buyouts, moving allowances and above-market tenant improvement allowances.
Construction Starts
The total number of buildings that broke ground (commenced construction) over a given period. The starts are typically measured in number of buildings and square feet.
Contiguous Block(s)
Multiple suites or spaces on either the same floor or the adjoining floor(s) in the same building.
Contract Rent
The rental rates stipulated in an executed lease agreement. Typically, the contract rate is based on the first year rate as opposed to the average rate over the term of the lease. (Synonym: base rate)
A building that is changed from one use to another (i.e., an office building that is converted to a multifamily building). Space being converted is removed from current inventory and included in the under construction category for the planned future use (i.e., an office building being converted to an apartment building will be removed from office inventory and included under apartment space, or number of units, under construction). (Also see adaptive reuse)
Core Area
The common area plus vertical penetrations in an office building measured in square feet. Core area is typically expressed as a percentage of net rentable area. This factor, which ranges from 5 to 20 percent for typical office buildings, can be computed for an entire building or a single floor of a building.
Core Investment
An investment in a high-quality real estate asset that is located in a highly accessible and highly desirable submarket. The asset commands among that submarket’s highest rents and requires virtually zero near-term capital expenditures. The asset is at least 80 percent leased, carries long-term leases with creditworthy tenants, and is among the most sought-after assets in the market, suggesting there is significant market liquidity.
Coworking Space
Workspace offered for lease for short- to long-term periods in a communal setting. Space for office, artistic or manufacturing use can be leased by the day, month, year or even hour. The physical space leased can range from a traditional dedicated private office with a door to an unassigned seat on a bench along a communal table. Coworking spaces go beyond just providing a physical work environment. They are typically operated by entities that offer business-related lectures, social events and a sense of community for their entrepreneurial tenants, thus helping them grow their businesses.
Creative Office Space
Previously industrial space with high ceilings and exposed air ducts. The space is often made of brick and timber and has been converted to office or studio space that often caters to technology, advertising, media and entertainment tenants (TAME).
Creditworthy Tenant
A tenant with a business that has been in existence for numerous years, that has strong financial statements, or that has a large market presence that could be rated as investment grade by a rating agency. Financial and business stability implies that the tenant is highly likely to honor its lease commitment; the tenant is, therefore, viewed as a low-risk renter. Buildings with credit tenants as anchors are considered less risky investments for lenders.
Cross Dock
Loading docks on opposite sides of a relatively shallow distribution facility that allow for quick loading, sorting or unloading from one vehicle to another (i.e., materials from one truck at a loading dock are unloaded, sorted and reloaded onto one or more trucks).
Cubic Volume
In many industrial facilities, the cubic volume of the building must be calculated so a user can determine the size and type of racking and sorting equipment that can be accommodated.