Glossary
Key terms and definitions for small bay flex industrial real estate. From CAM to cap rates, learn the language of the industry.
A
B
Base Rent
The contractual rent for the premises before operating expense recoveries, escalations applied in later years, or concessions that change effective rent.
Base Year
The reference year used in modified gross leases to establish a baseline for operating expenses, above which tenants pay increases.
Basis Point (bps)
One one-hundredth of one percent (0.01%). Used to express interest-rate changes, loan spreads, and fees.
Bay Size (Structural Bay)
The distance between structural columns in an industrial building, determining unit flexibility and the origin of the term 'small bay' industrial.
Break-Even Occupancy
The minimum occupancy rate at which a property's income covers all operating expenses and debt service, with no cash flow left over.
Build-to-Suit (BTS)
A construction arrangement where a building is custom-designed and built for a specific tenant's requirements, typically with a long-term lease commitment.
C
CAM (Common Area Maintenance)
Shared operating expenses for a commercial property that are passed through to tenants based on their pro-rata share of the building.
Cap Rate (Capitalization Rate)
A measure of a property's expected rate of return, calculated by dividing Net Operating Income by the property's value or purchase price.
Cash-on-Cash Return (CoC)
The annual pre-tax cash flow an investor receives from a property divided by the total cash they invested, expressed as a percentage.
CC&Rs (Covenants, Conditions & Restrictions)
The recorded rules that govern what warehouse or garage condo owners can do with their units and common areas, enforced by the condo association.
Clear Height
The usable vertical space in a warehouse, measured from the finished floor to the lowest hanging obstruction.
Cold Shell
A minimally finished commercial space delivered as structure and utility stubs only, without HVAC distribution, finished interiors, or move-in-ready systems.
Commitment Fee
A fee paid to a lender to secure a loan commitment, usually expressed as a percentage of the committed loan amount.
Condo Association (Owners Association)
The governing body for a warehouse or garage condo regime that owns and maintains common elements and collects dues from unit owners.
Contractor Garage
A small bay industrial unit designed for trade contractors, combining warehouse space for equipment and materials with a basic office or showroom area.
Credit Analysis
The process of evaluating a prospective tenant's financial health and ability to pay rent consistently throughout their lease term.
Cross-Dock
A loading layout with doors on opposite sides of a building so freight moves in one side and out the other with little or no long-term storage.
D
Demising Wall
The shared wall that separates one tenant's unit from another in a multi-tenant building, defining each suite's demised premises.
Dock-High Loading
A loading configuration where the warehouse floor is elevated to match semi-trailer bed height (48-52 inches), enabling direct forklift access to trucks.
DSCR (Debt Service Coverage Ratio)
A measure of a property's ability to cover its debt payments, calculated by dividing Net Operating Income by total annual debt service.
E
Economic Occupancy
The share of potential rental income actually collected, reflecting vacancy, free rent, concessions, and uncollected balances—not just whether space is filled.
Effective Rent
The average rent a landlord actually collects over a lease term after accounting for free rent, escalations, and other concessions.
Escrow
Funds held by a third party—often the lender—to pay future obligations such as property taxes and insurance, or held as additional collateral.
Exit Cap Rate
The capitalization rate assumed at sale, used to convert projected NOI in the exit year into an estimated resale price.
Exit Fee
A fee charged by the lender when a loan is paid off before the scheduled maturity, typically a percentage of the outstanding balance.
F
G
Going-In Cap Rate
The capitalization rate at acquisition, calculated by dividing the property's first-year or in-place NOI by the purchase price.
Grade-Level Loading
A loading configuration where the building floor sits at ground level, letting vehicles drive directly into the unit instead of backing up to a raised dock.
Gross Lease (Full Service)
A lease structure where the tenant pays a single rental amount and the landlord covers all operating expenses including taxes, insurance, and maintenance.
H
I
L
Last Mile
The final leg of delivery from a distribution point to the end customer, driving demand for small industrial spaces close to population centers.
Lease-Up
The process of filling a newly constructed or repositioned property with tenants until it reaches stabilized occupancy.
Letter of Intent (LOI)
A preliminary document outlining the key business terms of a proposed lease before drafting a formal lease agreement.
Leverage
The use of borrowed money to acquire a property, increasing potential returns and risk relative to an all-cash purchase.
Light Industrial
A property classification for buildings used for light manufacturing, assembly, warehousing, and distribution with minimal environmental impact.
Load Factor
The ratio between rentable and usable square footage in a commercial property, representing the tenant's share of common areas.
Loan-to-Value (LTV)
The unpaid loan balance divided by the property's value, expressed as a percentage. Higher LTV means more leverage.
Loss-to-Lease
The gap between in-place rents and current market rents on occupied space, expressed as lost income the landlord is not yet collecting.
M
Mark-to-Market
Adjusting in-place rents (or other lease economics) to current market levels when modeling income, usually as leases expire and renew or re-tenant.
Mezzanine
An intermediate floor built within a warehouse unit's clear height, used for office, storage, or light assembly space without expanding the building's footprint.
Modified Gross Lease
A lease structure where the tenant pays base rent plus some operating expenses, with the landlord covering the remainder—a middle ground between gross and NNN.
Multi-Tenant Industrial
An industrial property subdivided into multiple units leased to different tenants, typically ranging from 1,000 to 10,000 square feet each.
N
O
Office Percentage
The share of a unit's square footage finished as office or showroom versus open warehouse or shop space, used as a tenant-fit specification.
Operating Expenses (OpEx)
Recurring costs of running a property as a going concern, subtracted from income to calculate NOI, and often passed through to tenants under NNN or modified gross leases.
P
Parking Ratio
The number of parking spaces provided per 1,000 square feet of building area, used to gauge whether a property has enough parking for its tenant mix.
Personal Guarantee
A pledge by an individual to be personally liable for a business's lease or loan obligations if the entity defaults.
Physical Occupancy
The share of rentable space that is occupied by tenants, regardless of whether those tenants are paying full rent.
Prepayment Penalty (PrePay)
A fee charged by the lender if the borrower pays down or pays off the loan earlier than allowed under the note.
Pro-Rata Share
A tenant's proportional share of building expenses, calculated as their leased square footage divided by total leasable area.
R
Rent Abatement (Free Rent)
A lease concession where the tenant pays no rent for a specified period, typically at the beginning of the lease term.
Rent Escalation
Scheduled rent increases built into a lease, typically expressed as a fixed percentage or dollar amount applied annually.
Rent Roll
A document listing all tenants in a property along with their unit details, lease terms, rental rates, and payment status.
Rentable Square Footage (RSF)
The total area a tenant pays rent on, including their usable space plus a proportional share of common areas.
Roll-Up Door (Grade-Level Door)
A sectional overhead door that rolls up vertically, providing direct drive-in access to a warehouse or industrial unit at ground level.
S
Second Generation Space
Previously occupied commercial space that comes with an existing buildout from the prior tenant.
Security Deposit
Money held by the landlord as financial protection against tenant default, unpaid rent, or property damage.
Shallow Bay
An industrial building with a shorter front-to-back depth, usually 100-150 feet, than a big-box distribution building built for deep racking.
Shell Condition
The state of completion in which a commercial space is delivered to a tenant, ranging from completely unfinished (cold shell) to move-in ready (warm shell).
Spec Building (Speculative)
A building constructed without a pre-committed tenant, built on speculation that market demand will attract occupants after completion.
Sprinklered Space
Building area protected by an automatic fire sprinkler system, which affects code allowances for storage height, occupancy, and insurance.
Stabilized
A property operating at expected steady-state occupancy, rents, and expenses—typically after lease-up—so NOI reflects a normal year rather than a ramp.
T
Tenant Improvement Allowance (TI)
Money provided by the landlord to help a tenant customize or build out their space, typically expressed as a dollar amount per square foot.
Tenant Underwriting
The comprehensive due diligence process of qualifying prospective tenants by evaluating their creditworthiness, business viability, and fit for a property.
Three-Phase Power
Electrical service that delivers power in three alternating phases, the standard for industrial equipment, and a key tenant-fit spec alongside amperage and voltage.
Trade Contractor
Skilled tradespeople and their businesses—HVAC, plumbing, electrical, roofing, and similar services—who make up the core tenant base for small bay industrial.
U
V
Vacancy Rate
The percentage of available space in a market or property that is unoccupied and available for lease.
Value-Add
An investment strategy that increases NOI and value through lease-up, mark-to-market, operational fixes, or light-to-moderate renovations—not just collecting in-place income.
Vanilla Shell
A commercial space delivered with only basic finishes—concrete floors, drywall, electrical panel, and roll-up door—ready for tenant buildout.
W
Y
Yard Space
Exterior paved or fenced area used for vehicle parking, outdoor storage, staging, or equipment, separate from the building's interior square footage.
Yield on Cost (YoC)
A development or value-add return metric that divides a property's stabilized annual Net Operating Income (NOI) by its total project cost.