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    Commercial Real Estate Glossary

    Glossary

    A

    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

    This retail center is 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 (unconnected) anchors and only a minimum amount of small specialty tenants.

    Present value (PV)

    The sum of 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.

    Present value method

    A comparison technique that compares the present values of the cash flows for any two real estate alternatives. The best user alternative is based on the lower present value amount. It is not the same as net present value.

    Prestige and property classes

    In reference to the recognition that various levels of status may be assigned to commercial properties as defined by user needs, the quality of a property and its amenities in relation to site factors, and its general location, suggesting the division of properties into distinct classes.

    Price

    The dollar amount that was offered, asked, or actually paid for a property.

    Primary source data

    Information obtained directly from field observations and survey instruments (by observing or monitoring a phenomenon or site firsthand), typically involving quantitative measurement and/or qualitative assessment of that which is observed or monitored.

    Principal

    The portion of a loan payment used toward reducing the original loan amount.

    Probabilities and expected value

    A quantifiable method of risk analysis. This method assigns probabilities to specific, possible investment outcomes, calculates an expected outcome for the investment based on these probabilities, and measures the likelihood that actual results will differ from the expected outcome. This method of risk analysis can be applied directly to real estate investments. It also can be used in conjunction with the forecasts generated through sensitivity analyses. This technique requires that probabilities be assigned to possible outcomes. Probabilities on the best-case, most-likely, and worst-case scenarios can be assigned to the resulting expected values for the return. Variances also can be computed using the assigned probabilities.

    Production

    Any economic activity that alters, enhances, or transforms a product or material, thereby increasing the value of that product or material by changing its physical form and/or location.

    Property data

    Property/site-specific information obtained from primary and secondary sources.

    Property market

    The supply and demand for ownership interests in property.

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