Commercial Real Estate Glossary: (N-P)

Neighborhood Center
A center designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighborhood. Supermarkets and drug stores anchor many of these centers. Stores supporting these anchors offer pharmaceuticals and health related products, sundries, snacks, and personal services. A neighborhood center usually is configured as a straight-line strip with no enclosed walkway or mall area, although a canopy may connect the storefronts

Net Lease
A lease in which the tenant pays, in addition to the base rent, all operating expenses such as real estate taxes, insurance premiums, and maintenance costs.

Net operating income (NOI)
The potential rental income plus other income, less vacancy, credit losses, and operating expenses

Obsolescence
The inadequacy, disuse, out-datedness, or non-functionality of facilities, infrastructure, products, or production technologies due to the effects or time, changing market conditions, or decay. This factor is considered in depreciation to cover the decline in value of fixed assets due to the invention and adoption of new production technologies or changing consumer demand

Office property
A commercial property type maintained for or occupied by professional or business offices. Such properties typically house management and staff operations. The term office can refer to whole buildings, floors, parts of floors, and office parks. Office space that can be used for a variety of purposes sometimes is called generic office space. Office properties may be classified as Class A, B or C. Class A properties are the most functionally modern. Class B and C properties in the same market typically command lower rents because they are older and in need of modernization.

Office/Service
Industrial space category in attractive, park-like settings with landscaping. They are usually at the highest end of the market rents and devote more than 25 percent of their space to offices. Office/service properties are similar to research and development facilities.

Office/Warehouse
Industrial space category that may devote 5 to 25 percent of its space to office requirements and typically is constructed of metal, block or wood. This category usually features dock-high loading.

Operating Expense Stop
A negotiable amount at which the owner’s contribution to operating expenses stop. It also can be stated as the amount above which the tenant is responsible for its pro-rata share of operating expenses.

Operating Expenses
Cash outlays necessary to operate and maintain a property. Examples of operating expenses include real estate taxes, property insurance, property management and maintenance expenses, utilities, and legal or accounting expenses. Operating expenses do not include capital expenditures, debt service or cost recovery

Opportunity Cost
The cost of selecting one alternative represented as the benefit foregone from the next best alternative

Outlet Center
A retail property type usually located in rural or occasionally in tourist locations. These centers consist mostly of manufacturer’s outlet stores selling their own brands at a discount and typically are not anchored. A strip configuration is most common, although some are enclosed malls and others can be arranged in a village cluster

Owner
The party who has the right to possess, use, lease, and sell a property

Partially Amortized Mortgage Loan
A loan in which the payments do not repay the loan over its term, so a lump sum (balloon) is required to repay the loan at the end of the term

Payment
A periodic cash outlay paid (or received) for two or more periods

Percentage Rent
The rent over base amount that tenants pay to owners on tenant sales over a specified dollar amount. It frequently is found in retail leases. Also known as overage rent.

Points
Charges prepaid by the borrower upon origination of the loan. One point equals one percent of the loan amount. Also known as a loan point

Potential Rental Income
The total amount of rental income for a property if it were 100 percent occupied and rented at competitive market rates

Power Center
A retail center dominated by several large anchors, including discount department stores, off-price stores, warehouse clubs, or category killers – stores that offer tremendous selection in a particular merchandise category at low prices. The center typically consists of several freestanding anchors and only a minimum number of small specialty tenants

Present Value
The sum all future benefits or costs accruing to the owner of an asset when such benefits or costs are discounted to the present by an appropriate discount rate

Principal
The portion of a loan payment used towards reducing the original loan amount

Promissory Note
The written promise to repay the mortgage loan that accompanies the mortgage

Property Data
Property/Site-Specific information obtained from primary and secondary sources

Psychographics
Intangible characteristics of a local economy that define and shape the quality-of-life element and the social and cultural identity of the local population. Also known as lifestyle characteristics