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    Commercial Real Estate Glossary

    Glossary

    A

    Absorption

    The amount of inventory or units of a specific commercial property type that become occupied during a specified time period (usually a year) in a given market, typically reported as the absorption rate.

    Accumulated cost recovery

    Total cost recovery deductions taken throughout the holding period of a property.

    Active income

    Income from salary, wages, tips, commissions, and activities in which the taxpayer materially participates. Also see passive income.

    Add-on factor

    The ratio of rentable to useable square feet. Also known as the load factor and the rentable-to-useable ratio. Also see efficiency percentage.

    Formula:Add-on factor =Rentable square feet Useable square feet

    Add Value

    Fourth stage of four-stage transaction management process pertaining to a transaction manager's planning, effort, and continual contact with key decision-makers, investors, and users, as well as contact with ancillary professionals. This ongoing process allows for feedback, establishes a network for problem solving, provides a means to offer additional services to the client, and enhances the transaction manager's preparedness for the next assignment.

    Adjusted basis

    The original cost basis of a property plus capital improvements, less total accumulated cost recovery deductions, and partial sales taken during the holding period.

    Ads

    See annual debt service.

    Agglomeration economies

    Cost reductions or savings that come about from efficiency gains associated with the concentration or clustering of firms/producers or economic activities and the formation of a localized production network.

    Amortization

    The repayment of loan principal through equal payments over a designated period of time consisting of both principal and interest.

    Annual debt service (ADS)

    The total amount of principal and interest to be paid each year to satisfy the obligations of a loan contract.

    Annual percentage rate (APR)

    The true annual interest rate payable for a loan in one year taking account of all charges made to the borrower, including compound interest, discount points, commitment fees, mortgage insurance premiums. It also takes into account the time at which the principal is repaid (especially when payments of principal are made in installments throughout the year, but interest is charged at the beginning of the year), but not the actual expenses incurred by the lender in making the loan and recharged to the borrower. (Encyclopedia of Real Estate Terms 2nd Edition, Damien Abbott)

    Annuity

    Regular fixed payments or receipts over a designated period of time.

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