Getting started

New to retail development? The words, in plain English

Throughout the app, a dotted underline means you can hover or tap for the meaning.

Appraised value

The county appraisal district's value for tax purposes. A useful benchmark, but often below what a building would sell for.

Breakeven price

The sale price where selling now and leasing up first come out the same. An offer above it favors selling; below it favors waiting.

CAM · common area maintenance

Upkeep of shared areas — parking lot, landscaping, lighting, snow and trash. Usually billed back to tenants as part of NNN charges.

Cap rate · capitalization rate, exit cap

How buyers price a rented building: value = one year of net income ÷ cap rate. A 6.5% cap means $65,000 of yearly income is worth $1 million; a lower cap rate means a higher price.

Cars per day · AADT, traffic count

How many vehicles pass the site on an average day (AADT, from TxDOT). Retailers like restaurants and banks often require a minimum before they'll sign.

Cost of capital · discount rate

The yearly return your money could earn elsewhere at similar risk. It's the rate used to turn future money into today's dollars.

Equity

The cash that you and your investors put into the deal, as opposed to the bank's loan. It's paid back after the loan, and earns the profit.

FAR · floor area ratio

How much building the zoning allows relative to lot size. A 0.5 FAR on a 100,000 SF lot allows 50,000 SF of building.

Free rent · rent abatement

Months at the start of a lease when the tenant pays no base rent, usually while they build out and open. A common way to win a tenant without lowering the rent.

Ground lease

Renting out the land only; the tenant builds and owns their building. Low risk, steady income, and the land comes back at the end.

Leasable SF · rentable SF, GLA, gross leasable area

The square feet you can actually rent to tenants — the number rents are multiplied by.

Lease-up

The months after construction spent finding tenants and getting them open and paying. Longer lease-up means more months of loan interest with little rent.

Leasing commissions · LC, broker fees

What the landlord pays the brokers who bring and sign a tenant, usually a percentage of the total rent over the lease.

Loan to cost · LTC

The share of the total project cost the bank lends. At 65% LTC, you and your investors put up the other 35% as equity.

LOI · letter of intent

A short, usually non-binding letter where landlord and tenant agree on the main terms before lawyers write the lease.

Modified gross

A lease where the rent already covers some or all operating costs, so the landlord pays them. Simpler for the tenant; more cost risk for the landlord.

NNN · triple net

A lease where the tenant pays its share of property taxes, insurance and upkeep on top of rent. Most retail leases are NNN, so those costs pass through instead of coming out of your income.

NOI · net operating income

The rent a building collects in a year after paying its operating costs (taxes, insurance, upkeep), before any loan payments. It's the number buyers and banks value.

Operating costs · opex, operating expenses

What it costs each year to run the property: taxes, insurance, CAM and management, quoted per square foot.

Pad site · outparcel

A separate small lot at the front of a center, usually for a restaurant, bank or drive-thru. Often sold or ground-leased on its own.

PD · planned development

A custom zoning district with its own rules, written for one project. The city ordinance for that PD, not the base zoning, says what's allowed.

Rent bumps · escalations

Built-in rent increases, usually a percentage each year (often 2–3%) or a step every five years.

Setback

How far the building must stay from the property line or street, set by zoning. Large setbacks shrink what you can build.

Shell · cold shell, dark shell

The finished building without tenant interiors — walls, roof and storefronts, but no finished suites. Selling 'the shell' means selling before it's leased.

Stabilized

The point where the center is about as full as it will normally be and rent is coming in steadily. Buyers pay the most for a stabilized building.

Taxable sales

What stores nearby reported selling, from the Texas Comptroller. Strong sales nearby tell retailers shoppers already come to this area.

TI · tenant improvement allowance, TI allowance

Money the landlord gives a tenant to build out their space, quoted per square foot. It's a real cost of signing the lease, paid before the rent pays it back.

Today's dollars · present value, PV, NPV

Money later is worth less than money now, because you could have invested it meanwhile. Present value converts future money into what it's worth today so two choices can be compared fairly.

Vacancy allowance · credit loss

The share of rent you plan to lose over time to empty suites and tenants who don't pay. Even full centers are underwritten with some, often 5%.

Vanilla box · warm shell, white box

A suite with basic finishes in place (lights, HVAC, restroom, drywall) so a tenant only adds their own look. Costs the landlord more than a shell, but leases faster.

WALT · weighted average lease term

The average time left on the leases, weighted by size. Longer WALT means income is locked in longer, which buyers and lenders like.

Yield on cost

Stabilized NOI ÷ total project cost. If it's well above the cap rate buyers pay, the building is worth more than it cost to build — that gap is the developer's profit.