Glossary of Commercial Real Estate Terms

From the REALTORS® Commercial Alliance

12/2005

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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