Glossary
We've put together a list of terms that are widely used in the commercial real estate market. We hope it will help you find the necessary definition or brush up your knowledge. If you wish to share your expertise with everyone in the industry, please send a message to data@m2data.net
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A
A number of years passed since the building was built at the time of the deal or appraisal. A sum of money which is transferred from one contract party to the other in order to perform the obligations or secure intentions to perform certain actions, for instance to buy a real estate property. If a deal is cancelled on the fault of the party which received the advance, it is obliged to return the double amount of the advance. Persons or legal entities able to influence the decisions of companies, private individuals or other entities leading business activities. Affiliated parties may include a company's CEO, parent companies, subsidiaries, a person's spouse, parents, etc. A system that excludes using any forced air equipment. Air circulation is achieved through pressure differential. A company which rents 5-15% of the building area and attracts the largest stream of visitors. A date, on which a property appraisal was made. A transfer of debt, and all the associated rights and obligations, from one creditor to another. Upon debt assignment a debtor must carry out his or her obligations to the new creditor. A set of technical means and facilities used to extinguish fires. These systems aim at detecting center of ignition, bringing fire under control and extinguishing it at an early stage.
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B
Five international consulting companies: JLL, KNIGHT FRANK, Colliers, CBRE, CW The US standard for measuring the area of commercial premises. It is essentially one of the most globally widespread methods of real estate evaluation in office and retail segments. The measurements primarily aim at providing owners along with property management and developer companies the most precise and convenient leasing and building operation tool. Two or more elevators sharing a single engineering system. A time period which comprises building design, construction, maintenance, repair, reconstruction and demolition. "Bureau of Technical Inventory (BTI) is a state-accredited agency that collects and systemizes data on real estate properties in Russia. BTI database has information about property location, technical specifications along with related changes, for example, architectural replanning. The agency also provides a number of services: - issues technical certificates, architectural plans, notes and other documentary evidence needed for ownership registration, - makes property appraisal to determine its value and tax base, and records these changes in the database. BTI - is also a technical certificate for the premises.The document is valid for 5 years. " A non-residential building or a complex of buildings possessing infrastructure necessary for carrying out business activities. Business centers are divided into classes depending on location, infrastructure, parking capabilities, design and construction features, etc. A non-residential building cannot have residential units. A number of office buildings located on a single land lot which share common infrastructure and surroundings. Besides office buildings, the area typically features parklands, shops, cafes, gyms and large parking lots. Due to their conceptual planning and vast area that they occupy, business parks are rarely found in the city. The buildings are mainly low-rise (6-9 storeys high). A sum of money which is transferred from one contract party to the other before real estate handover, service provision or other obligation specified by the contract. Rentable area plus percentage of common facilities.
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C
A real estate property value based on state evaluation. Cadastral value is used for tax calculations. A ratio indicating the rate of return that a real estate property is expected to generate. Capitalization rate is calculated by dividing net operating income by property asset value. A professional who leads design and survey works and the process of building design. He or she is also involved in construction supervision and commissioning. One of the project’s key professionals responsible for construction management and control – from bidding to completion. A system of air conditioning. A company providing cleaning services in premises. A coworking and a residential building under the same roof housing communities of like-minded people. A distance between neighboring columns. Column spacing is important to consider when designing private offices and other non-openspace layouts. Service area, cellars, hallways and lobbies, WCs. A real estate property which is in ownership of several parties. A common property can have joint ownership and shared ownership. A time period during which a rental rate could be reduced, for example in case of act of providence. A property which is already operating. A legal entity or private individual investing in property construction or an authorized representative of the investor. The national government as well as public authorities and private companies can be the customer. Prolongation of the amount of time that a contract will remain in force. Prolongation may need a separate agreement between parties or may be automatic if the master contract (for example, a lease agreement) includes a clause that implies automatic prolongation in case certain conditions are met. A set of real estate appraisal methods based on determining the cost of construction or reconstruction of the building less depreciation. An obligation by one of the parties, which is conditioned on the performance of the obligations by the other party. For example, if a buyer under a sale and purchase contract transfers cash to a seller, he or she expects counter-execution of obligations on behalf of the seller, in this case the conveyance of property. A space where one can rent a workplace or a small office for a certain time period (from one hour to several months). A coworking is typically divided into private and common areas, meeting rooms and conference halls. It provides its residents with Internet access and necessary office appliances. An office space divided into separate rooms. Today office (cabinet) layout is unpopular although it has some advantages. A supplementary index used in calculations of usable area. On the Russian market corridor index often indicates a percentage of common facilities.
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D
An injury to real estate property expressed in terms of money. Property damage may mean a partial loss of property, decrease of its value, etc. "A decline in real estate property value. Depreciation can be either physical or moral. Physical depreciation is a decline in operating characteristics due to material and construction wearout as well as negative environmental and human impact. Physical depreciation is expressed in percentage or monetary terms. Moral depreciation happens after a certain time period when property functional characteristics become outdated and fail to correspond to the requirements of people as well as modern standards. Despite moral depreciation, a building can still be durable and without signs of physical wearout. " A private individual or a company which buys and develops real estate properties (buildings, land parcels) aiming at future sale and gaining revenues. A developer controls all the stages of project life cycle from preparing project documentation to market entry. A business activity related with construction, reconstruction and other modifications of properties aimed at increasing their value. A lease contract sealed between a landlord and a tenant directly, without intermediaries. An index that allows estimating the present value of the future cash flows. In real estate discount rate is used in evaluating the investment attractiveness of a property. A calculation of actual value of invested money over time.
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E
Unified State Property Register. A source of data on real estate property in Russia. The register contains structured information on property that underwent cadastral registration, property titles and their respective roots and holders. The extract from EGRN confirms the state approval of newly established or changed property titles. Amount of time during which a building generates revenues. An age corresponding to physical condition of the building and taking account of prospects for its further use. A term indicating different types of electricity supply. There are three categories. The higher the category, the safer the building. A limitation on the right of ownership. Encumbrances, among others, include mortgages, leases, trust of estate, annuities, servitudes, etc. A set of various architectural and engineering constructions used to design an entrance to the building. A document confirming human and environmental safety of the building. A special account where a taxpayer holds cash which is transferred to a payment recipient in case specified conditions are met, for example, when a real estate property is put into operation. Contract provisions regarded as obligatory ones by the law (for example, a subject matter of a contract or a timeframe for completion of works) or any other conditions specified by contract parties as essential. Documents that confirm ownership of a building or a land parcel. Examples of evidence of ownership are sale and purchase agreement, a court ruling, a public authority decree, etc. Preliminary assessment of property market value. A reduction of property value caused by macroeconomic, industry, legal factors or by changes in the property surrounding area. A partial copy of a blueprint, plan or document.
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F
A procedure which includes visual check of a property made jointly by an owner and a tenant/buyer as well as signing of a handover act. An automatic system which warns people of a fire in a building. A work place assigned to a staff member in an office or a coworking. Any working desk, equipped by necessary office appliances, which may be used by any employee. Flexible working place may be found not only in the office premises but also in coworking space. A maximal possible load that a flooring can withstand, for example 250 kg per sq.m. An irresistible force or a sudden unforeseen event that prevents a contract party from fulfilling its obligations under the agreement. A sum of money which is to be payed as a legal penalty in case one of the parties breaches the agreement. A depreciation of a building due to its failure to comply with up-to-date requirements in regard to layout, architecture, security, ergonomics, etc. Functional depreciation can be curable and incurable.
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G
A real estate property which can be used for almost any activity. A topographic map and other land parcel data containing information about all the underground and surface mounted utility services and connections. A geological report is used in the development of construction project design or utility design.
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H
A legal document confirming that a tenant or a buyer has made a visual check of a property and is aware of its condition. If present, the property defects are listed in the handover act.
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I
An information system enabling access to supporting documentation on land lots. The service is available for private individuals, companies and self-employed businessmen. The documents can only be obtained in person and upon payment of state duty. Internal Rate of Return. A discount rate under which the project’s net present value equals zero. Actions evidencing an intention to sign a contract, accept performance of obligations or deny signing an agreement. A set of real estate value appraisal tools based on determining the expected revenues from the use of a property. Buildings used for industrial activity. A ventilation system which provides air inflow into the space and removes the used air with special equipment. Fixtures and fittings installed in a property that can't be separated from it without causing damage to it, for example, doors, windows, fan coil units, parquet floors, etc. Integrated development includes preparing documentation on area planning, determining land parcels boundaries within the given area, construction of transport, utility, social and other facilities in compliance with area planning documentation. A particular rate imposed over a sum of money which is to be payed by a debtor during the period when he or she uses the creditor's money. A complex of buildings, constructions, utilities and other properties which are physically or technologically integrated with each other. An integrated real estate complex is registered as a single real estate property. A company providing access to the Internet. A transaction that does not entail legal consequences. If the transaction was fulfilled and then declared invalid, one or more parties must return all the assets obtained as a result of the transaction to the other party.
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J
An ownership of real estate property by several parties without specifying each owner's share.
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K
The association of commercial real estate brokers.
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L
A land parcel with defined boundaries and area which obtains legal status, use permission and other attributes specified in the state land cadaster. A private individual or a company renting a building or a space for tenancy for a specified fee. Spaces can be rented out solely by the owner or their authorized representative. An official seat of a legal entity. A formal binding agreement which includes a commitment of one party to perform specific actions in relation to the other party, for example, to pay a debt. A banking transaction under which a payer entitles a bank to receive his or her monetary funds on a separate account and transfer them to a recepient in case certain conditions are met, for example upon completion of the transfer of the title. Monetary remedy paid as a compensation for loss and injury. A legal claim against a real estate property by a creditor. The lien holder has the right to obtain access to the property if debts are not paid in due time. Certain hindrances to exercise of ownership rights which may include property seizure or registration ban. A selection of commercial real estate offers. A lease agreement concluded between a landlord and a tenant for a minimum period of 12 months. Material and financial expenses as well as forgone benefit (missed profit) that an individual or a legal entity faces during restitution of their violated property rights.
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M
A combination of open space and office (cabinet) layouts A building or a group of buildings containing spaces of various purposes (shops, offices, entertainment infrastructure, residential properties). A sum of money paid by the tenant per month. A business cluster in Moscow’s Presnensky District built up with high-rise buildings which house offices, apartments and other infrastructure.
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N
Net operating income. A sum of all revenues from the property, minus all expenses (maintenance, operating expenses, cadastral tax, etc.) Net present value. A sum of discounted cash flows. One of the indicators of investment attractiveness of a project, for example a real estate purchase. A sum of money retained by a notary to protect its safety for a certain period of time. Along with a letter of credit and a safe deposit box a notary's deposit is used in real estate sale and purchase deals and in cases when a creditor is unavailable for receiving money.
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O
A building which initially was intended to be used for other purposes, but is in fact used as an office building. See “Operating expenses” Real estate properties that remain under construction and are listed in the Unified State Property Register as objects of incompleted construction. Renovated low-rise buildings adapted to accommodate office spaces. The area of an office mansion rarely exceeds 6000 sq.m. Buildings and spaces that companies use for their office service. A commercial real estate property which includes both office and warehouse spaces. Operational expenses. Expenses of a property management company allocated to building maintenance, i.e. facade repair and cleaning, elevator maintenance, garbage disposal, etc. A floor plan that does not imply partitions and enclosed rooms. Open space layout enables seating on a first come first served basis and reduces the rented space. Expenses that a property management company or an owner incurs in the process of building maintenance, i.e. repair, facade cleaning, elevator maintenance, garbage disposal, etc. An obligation to maintain a property and/or its utilities in accordance with technical norms or other standards specified in a contract and troubleshoot problems that may arise.
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P
Conditions and particularities of land parcel use. Permitted land use can be primary, conditionally approved and auxiliary. A set of purposes for which a property may be used due to its technical features or as specified in the contract. A decline in technical and operation capacity of a building due to physical wearing out over time. A building can no longer be operated and is subject to demolition once its physical depreciation reaches 70%. Physical life of a building A time period during which a building remains functional and complies with the corresponding standards. A binding agreement that obligates parties to sign a contract, for instance, a lease agreement or a sale and purchase contract. A professional who ensures implementation of objectives related to property construction. Residential, commercial, warehouse and retail properties are divided into classes depending on their location, design features, exterior and interior as well as infrastructure and parking capacity. Property class influences its value and rental price. A legal person who owns or rents a land parcel and may perform engineering surveying along with building construction, reconstruction and repair on the respective area. A firm dealing with management of real estate properties. Several real estate properties in ownership. A total cost of building a similar property less depreciation. Property replacement cost is used in insurance as an estimated cost of building reconstruction. Rights connected with possession, use and disposal of any belongings. A document containing all land parcels or other real estate object included into the unified state register. Public cadastral map also has data on cadastral number, land parcel or building area, its purpose and year of construction.
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R
Remaining economic life of a property. A time period from the appraisal date till the end of economic life of a property. The value of remaining economic life is used by an appraiser to evaluate future revenues from a property. A professional who works in the field of purchase, sale and leasing of real estate property. Cost determination of a property. A professional dealing with buying, sale and lease of commercial property. A broker helps to find a building or a space listed for rent, as well as sell or lease spaces. He or she typically accompanies the client at the property tours and clarifies the necessary details. A real estate professional providing a wide range of services including brokerage and analytics. A real estate consultant is responsible for implementation strategy, marketing analysis, sales plan, initial legal consultation, etc. A set of rights held by a real estate property owner, tenant or other user which include rights to use an own or other people's property under certain conditions. A professional who supports residential real estate deals. A record in the Unified State Property Register confirming property ownership rights or leasehold as well as their limitations and encumbrances. A payment that a tenant pays a landlord. Its amount is specified in the contract but may be changed upon agreement between the parties. A rental payment may be made monthly, quarterly or yearly. A possibility to use premises without paying rent or to pay a lower rate during a specified period of time. Rent free period is typically applied when the space undergoes repair, refurbishment or architectural replanning. A cost of rent of one square meter per month or per year. Rent rate may or may not take account of various indices, additional taxes and payments. A possibility of using assets without making any payments. May equal the usable area or alternatively is calculated as a product of usable area by loss factor. The rentable area is indicated in the lease agreement. A purchase or sale of commercial space with the long-term lease agreement. A payment that a tenant pays a landlord. Its amount is specified in the contract but may be changed upon agreement between the parties. A rental payment may be made monthly, quarterly or yearly. A cost of renting one square meter per month or year. It may or may not take account of various ratios, additional taxes and fees. Alteration of layout and purpose of premises in a real estate property which, among others, includes moving walls, changing room layouts and alteration of utilities. "An estimated cost of construction an exact replica of a property using the same materials and construction technologies." Expenses for replacement of certain design and technical elements in order to maintain market competitiveness of a property. A real estate property intended for human habitation. The ground floor may house commercial (including office) spaces. Buildings and spaces assigned to trading activities. A way to ensure the performance of obligations under contract. A creditor may seize a debtor's property and keep it until he or she performs the obligation, for example makes a payment. A clause in a contract that allows to extend the terms of contract to a period of time before the agreement was signed. A right to possess, use and dispose any belongings, including real estate. A person or a legal entity having property rights. Owning a property entails a risk of its damage or destruction. In other words, a property owner is subject to a risk of accidental loss of property.
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S
An approach in real estate appraisal which compares a given property with similar properties having available data on the respective prices and recent deals. A form of security deposit payed by a contract party aimed to demonstrate its willingness to complete the obligations under the agreement. For example, a tenant makes a securing payment to ensure timely payments, compensation of losses and other monetary obligations. Fixtures and fittings installed in a property that can be dismantled or removed from it, such as movable partitions, furniture, window blinds, etc. A certain restriction on ownership or tenancy of a land parcel or a building. A servitude can be either public or private. An ownership of real estate property by several parties with specifying each owner's share. Spaces leased without fit-out. A building comprising several stores, food service companies and companies providing entertainment services. A shopping mall is managed and operated as a single property. A rental agreement lasting less than 12 months. A set of technical devices and networks able to remotely control the heating, ventilation, lighting and air conditioning systems. A system designed to remove smoke from a building. It turns on in case of fire. An air conditioning system which consists of an outdoor and an indoor unit. A procedure of filing information about a lease agreement, including tenant's name and lease term to the Unified State Property Register. A procedure of filing information about a new property owner to the Unified State Property Register. A procedure of recording information about a real estate property incuding its address, cadastral number, area, etc. into the Unified State Property Register. Retail spaces on the ground floor with a separate entrance. A property rented by a subtenant which was leased to a sub-subtenant. Renting of property by a tenant to a third party. Under sublease agreement a tenant transfers a property to a subtenant under consent of a landlord.
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T
A legal person, authorized by a developer to provide utility engineering services. A private individual or a company temporarily using a building or a space for a predetermined fee. Property rights that may be confirmed by formal documents. An aggregate amount of cost allocated to depreciation expenses of a property. Total depreciation includes physical, external and functional depreciation. A transfer of a real estate property in trust to the other party which undertakes its administration, lease and other activities on behalf of the owner.
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U
An area inside the space that the tenant is actually using. Expenses on water pipe, ducting, garbage disposal, electricity and central heating.
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V
A powerful system of air conditioning for large areas often used in A and A+ business centers.
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W
Several warehouse buildings united by common area and infrastructure. A warehouse complex may include office spaces and a logistics hub. Buildings or spaces designed for storage of goods. An authorization to represent or act on another's behalf in a legal matter, for example, to sign a contract, accept performance of obligations, receive or file documents, etc.