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Commercial Real Estate Glossary




An investment’s increase in value.

Appreciation potential

The possibility or probability that a real estate investment will increase in value during the holding period.

Assessed value

The value of real property established by the tax assessor for the purpose of levying real estate taxes.

Average annual effective rate

The average annual effective rent divided by the square footage.

Average annual effective rent

The tenant’s total effective rent divided by the lease term.

Averaging method

A simple technique used to forecast next period's/year's vacancy rate by averaging previous years' vacancy rates; especially effective where vacancy rates have remained relatively flat or show little variability over time.

Balloon payment

The final payment of the balance due on a partially amortized loan.

Base (in lease terminology)

A face, quoted, dollar amount representing the rate or rent in dollars per square foot per year and typically referred to as the base rate.

Base rent

The minimum rent due to the landlord. Typically, it is a fixed amount. This is a face, quoted, contract amount of periodic rent. The annual base rate is the amount upon which escalations are calculated.

Basic employment

Employment that is considered to be export-oriented or export-driven, associated with activities that generate income from the sales of products and services in markets outside the local economy.


The total amount paid for a property, including equity capital and the amount of debt incurred.

Before-tax investment value

The sum of the present values of the mortgagor and mortgagee of property.

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