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Glossary of Terms

Acreage:  Refers to vacant land, but may refer to any parcel which may be measured in acres.

Anchor Tenant: Usually refers to tenants in an industrial park, office building, etc.  It may also refer to the largest and most reliable tenant in a building.

Available: Refers to all tenant space currently being marketed for lease. This includes space available for sublease and space in future developments (pre-leasing).

Average Occupancy: The average occupancy rate of each of the preceding 12 months. A high occupancy rate is nice to have. 

Base Rent: The minimum monthly rent, computed on a per- square-foot-per-year basis, due under the lease. The base rent marketed can be provided as a range, for example $18.75 to $19.50 per square foot.

Capitalization Rate: The percentage measured by the ratio between the net operating income and the produced asset and its capital cost. It is calculated by taking the annual net operating income and dividing it by cost (or value). For example, if a property is purchased for $1,000,000 and it produces $100,000 in positive net operating income the capitalization rate is ten percent.

Certificate of Occupancy: Presented by city building department to landlord or tenant after completion of tenant improvements and satisfactory inspections by city building department inspectors.



Contiguous Space: Multiple suites/spaces within the same building and on the same floor which can be combined and rented to a single tenant. Also, defined as a block of space located on multiple adjoining floors in a building (i.e., a tenant leases floors 6 through 12 in a building).

Core Factor: Represents the percentage of Net Rentable Square Feet devoted to the building’s common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Loss Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage.”

Effective Rent: The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant, usually expressed as an average rate over the term of the lease.

Existing Building: A building which has been issued a Certificate of Occupancy during the current period. Any leasing within the building will be attributed to the net absorption figure; however, vacant space will not be counted against net absorption. Vacant space will be included in the total vacancy tabulation.

Expense Stop: An agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases. May be applied to specific expenses (e.g., property taxes or insurance).

Full Service Lease: All costs of operation are paid by the landlord up to a base year or expense stop.

Gross Lease: Commonly specifies one rental amount inclusive of rent, taxes, utilities, maintenance, etc. associated with the property rental.

Gross Rent Multiplier: The quotient of the sale price divided by the gross rent.  Generally expressed as the monthly gross rent in a single family residential property and the yearly gross rent in multifamily units and commercial, office or industrial property.

Gross Scheduled Income: The total projected income from all rent revenues collected annually.

Gross Square Feet: Usually refers to gross area of a building by measuring from the outside of its exterior walls and including all vertical penetrations, such as elevator shafts. Also includes basement space.

Industrial Types: Karnes maintains two major subcategories of industrial space which are defined as either Flex or Warehouse space. These buildings are greater than 15,000 square feet unless within an industrial park containing more than 15,000 square feet. Additionally, owner-occupied space is not included in the inventory. Below are the definitions for each category.

  • Industrial Building: (1) Land which is zoned industrial.  (2) Real property improved specifically for industrial use.
  • Distribution:
  • Investment:
  • Manufacturing:
  • Office/Flex: A building providing its occupants the flexibility of utilizing the space. Usually provides a configuration allowing a flexible amount of office or showroom space in combination with manufacturing, laboratory, warehouse distribution, etc. Typically also provides the flexibility to relocate overhead doors. These properties are generally constructed with little or no common areas, load-bearing floors, loading dock facilities and high ceilings.
  • Research & Development:
  • Self/Mini Storage Facility:
  • Service:
  • Truck Terminal:  
  • Warehouse: Buildings containing 18- to 38-foot clear ceiling height unfinished warehouse space with dock height or drive-in loading. Additionally the warehouse category includes manufacturing space, which contains buildings with 10- to 16-foot clear ceiling height or sufficient height for overhead cranes. Loading for these buildings may also be dock height or drive-in.

Inventory: The total amount of rentable square feet of multi-tenant properties greater than 15,000 square feet in a given category. Inventory refers to only existing or completed space within a certain market during a given period. Future space either under construction or proposed is not included in this total.

Modified Gross Lease: Any arrangement whereby the tenant pays one or more of the expenses covered by the landlord in a Full Service lease, but not all of the expenses as in a Triple Net lease.

Net Absorption: The square feet leased in a specific geographic area over a fixed period-of-time after deducting space vacated in the same area during the same period. Absorption of space in new completions is also added to this total.

Net Operation Income: The difference between adjusted gross income and operating expenses.  May or may not include depreciation.

Net Rentable Square Footage: Floor area of a building less any vertical penetrations of the floors.

Office Types: Below are the defined office property types that are maintained within the Karnes inventory of properties. These multi-tenant buildings are greater than 15,000 square feet unless within an office park containing more than 15,000 square feet. Additionally, owner-occupied space is not included in the inventory.


  • Office Building: A single or multi-story building primarily used for business functions. The building is generally air-conditioned and finished for continued occupancy by employees.
  • Government:  
  • Investment:  
  • Medical Office: Buildings containing space designated for medical functions such as doctors, dentists, medical lab or medical facilities. The space is typically air-conditioned and finished for medical functions.
  • Office Condominium:
  • Research and Development:
  • Standard Office:  

Office Classifications: Building classifications in most markets refer to Class “A”, “B”, and “C” properties. While the rating assigned to a particular building is very subjective, Class “A” properties are typically newer buildings with superior construction and finish in excellent locations with easy access, attractive to credit tenants, and which offer a multitude of amenities such as on-site management or covered parking. These buildings, of course, command the highest rental rates in their sub-market. Note that a Class “A” building in one sub-market might rank lower if it were located in a distinctly different sub-market just a few miles away containing a higher end product. Karnes does not recommend the publishing of a classification rating for individual properties. General terminology for these classifications is defined below:

  • Class A: Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.
  • Class B: Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same price.
  • Class C: Buildings competing for tenants requiring functional space at rents below the average for the area.

Parking Ratio or Index: The intent of this ratio is to provide a uniform method of expressing the amount of parking that is available at a given building. Dividing the total rentable square footage of a building by the building’s total number of parking spaces provides the amount of rentable square feet per each individual parking space (expressed as 1/xxx or 1 per xxx). Dividing 1000 by the previous result provides the ratio of parking spaces available per each 1000 rentable square feet (expressed as x per 1000).

Present Occupancy:

Proposed Building: Space in a proposed commercial development which is not yet under construction (defined by the pouring of building footers). Future Proposed projects include all those projects waiting for a lead tenant, financing, zoning, approvals or any other event necessary to begin construction. Also may refer to the future phases of a multi-phase project not yet built.

Rentable Area: Denotes the number of square feet in a commercial building deemed to be rentable. This may include a common area load factor or allowance for building amenities such as hallways and lavatories.

Retail Types: Karnes maintains several categories of retail space for its analysis, which does not include outparcel or outlet center space. The category definitions are detailed below with a definition of both outlet and outparcel space. These buildings are greater than 15,000 square feet and are not owner-occupied unless part of a center dominated by leased space.

  • Big Box/Free Standing:
  • Community Centers: These centers contain approximately 125,000 to 400,000 square feet.  Supermarkets are the most common anchors in community centers. Discount department stores, home improvement stores and clothiers can also anchor these centers.
  • Free Standing Building: A building containing one business, rather than a row of stores or businesses with a common roof and side walls.
  • Investment:
  • Neighborhood Centers: These centers usually range from 50,000 and 125,000 square feet, with supermarkets and drugstores as anchors. 
  • Outlet Mall: Usually located in rural or occasionally in tourist locations, outlet centers consist mostly of manufacturers’ outlet stores selling their own brands at a discount. These centers are typically not anchored. A strip configuration is most common, although some are enclosed malls, and others can be arranged in a “village” cluster. The average center ranges in size from 50,000 to 400,000 square feet.
  • Power Centers: These centers are usually heavily anchored by very large tenants and have few, if any, small shops. They range in size from about 250,000 to three-quarters of a million square feet.
  • Regional Centers: These centers are usually enclosed malls, which because of their larger size, have more anchors, a deeper selection of merchandise and draw from a larger population base. The anchors are three or more full-line department stores that account for 50/70% of the total area. The center’s typical configuration is as an enclosed multi-level building. The center’s total area is typically in excess of 800,000 square feet.
  • Specialty Centers: These centers come in many sizes, but are usually occupied by shops paying higher than average rental rates and located in more upscale neighborhoods. Specialty centers are usually unanchored.
  • Strip Centers: These centers usually range from 20,000 to 50,000 square feet in size. Strip centers usually have no large anchors. They contain a wide mix of tenants and are found in just about every submarket.

Sublease Space: Sublease space is offered on the market by the current tenant for sublease, regardless of whether the space is occupied or vacant. This space often competes with direct lease space (offered directly by the building owner or agent).

Topography: The contour of land surface, such as flat, rolling, mountainous, etc.

Triple Net Lease (NNN): All costs of operation including, but not limited to, real estate taxes, insurance and common area maintenance are borne by the tenant on a pro rata basis.

Under Construction: When construction, as defined by the pouring of building footers, has started but the Certificate of Occupancy has not yet been issued. Site grading does not constitute the commencement of construction as many sites are graded, but not developed for many months or even years.

Under Contract:

Vacancy Rate: The total amount of physically vacant space compared to the total inventory of space and expressed as a percentage. This is calculated by multiplying the vacant space times 100 and then dividing it by the total inventory.

Vacant Space: Refers to existing unoccupied tenant space currently being marketed for lease. This excludes space available for sublease or occupied space currently being marketed for lease.



Written by karnes

June 2, 2009 at 5:52 pm

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