This is the part two of the top 10 most used terms in commercial real estate. I have worked in the Gainesville commercial real estate market and would like to share the following information with you.
6. Building Classifications: Office buildings are classified into 3 basic categories, A, B, and C. These standards, surprisingly can vary by market.
Class A refers to the newest and highest quality buildings in their market. These are the best looking buildings with the best features and amenities. They are very well located and are professionally managed.
Class B represents the buildings that are one notch below class A. These are a little older but are well managed and have good quality tenants. These can be converted to class A easily and are favored by investors.
Class C are generally older buildings located in less desirable areas and often need renovation. Being older, the infrastructure is outdated and demand the lowest rent.
7. Net Absorption: This refers to the amount of space occupied at the end of the period minus the amount of space occupied in the beginning of a period. This also takes into account space vacated and newly built space during that period.
8. Return on Investment: A very common term. ROI as abbreviated, is the performance measure of the efficiency of an investment or to compare the efficiency of a number of different investments. It is calculated by deducting the cost of investment from the gain from investment and then dividing that figure by the cost of investment. This figure is expressed as a percentage.
9. Net Operating Income: This is calculated by adding up all revenue from the property minus all necessary operating expenses. Aside from rent, a property may also generate ancillary income from laundry, parking lot, vending machines etc. Operating expenses are the ones that are required to run and maintain the building. These include: utilities, repairs, property taxes, cleaning expenses, etc.
10. Tenant Improvements: The customization made by the landlord to a building or a rental space as part of the lease agreement. These include changes to walls, floors, lighting, etc. The tenant improvements usually have an economic life of five to ten years and span the average commercial lease term. At Trimark Properties, we offer 100% customizable spaces to our tenants. To learn about some of the tenant improvements made by us, visit this page and read more about Feathr’s Gainesville office space.
Here is my previous post about - The top 10 most used terms in commercial real estate – Part 1.
