DEVELOPMENT TERMINOLOGY

Below is a collection of terms and concepts most commonly used in the commercial development of land and buildings. Included are the various stages of the development process, and types of development and redevelopment projects.

Development Process and Asset Life Cycle

Below are listed the general categories typically used to define the development process and the asset life cycle.

1. Purchase land or asset.

2. Assess general economic conditions.

3. Assess the capital markets and obtain financing.

4. Assess the space markets.

5. Understand demographics and social forces.

6. Develop a master plan or site plan.

7. Design the base building or interiors.

8. Obtain entitlements and permits.

9. Construct the project.

10. Lease the project.

11. Operate and maintain the building.

12. Sell the asset.

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Building Status Definitions

Delivered - A building that has completed construction (i.e. obtained its certificate of occupancy). With a COO (Certificate of Occupancy), the property will be considered delivered whether or not tenants have occupied the space. (Synonyms: completion; new supply)

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Proposed or Planned - A building that has received zoning approval but has not yet started construction.

Under Construction - A building is under construction when construction permits have been obtained and site excavation has begun. If a site is being redeveloped, demolition of existing structures does not necessarily indicate that construction has begun. Sites are sometimes cleared years in advance of a groundbreaking.

Under Renovation - A building is typically under renovation when construction permits have been obtained and demolition has begun. A building is under renovation if it remains inhabitable by tenants during the construction. If an existing building is gutted extensively (i.e., elevators and bathrooms do not function and it can, therefore, not be occupied by a tenant), then the building should be removed from inventory and redelivered when the occupancy permit is issued.

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Types of Development and Redevelopment Projects

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Adaptive Reuse - A building converted to a different use in order to meet current demand. Examples include a factory converted to retail use or an office building converted to a school. (Also see conversion)

Build-to-suit - A building is designed and tailored for a specific tenant, often because the tenant is unable to find suitable space in the speculative market. Sometimes (but not always), a build-to-suit project includes specific design features not commonly found in the speculative market, thus compelling the tenant to have a special facility built. The build-to-suit project is usually contracted with a developer who owns and operates the completed facility occupied by the tenant. Generally, a build-to-suit project becomes a single-tenant building upon completion.

Conversion - A building that is changed from one use to another (i.e., an office building that is converted to a multifamily building). Space being converted is removed from current inventory and included in the under construction category for the planned future use (i.e., an office building being converted to an apartment building will be removed from office inventory and included under apartment space, or number of units, under construction). (Also see adaptive reuse)

Infill - Infill is the development of one or more buildings on underutilized land situated between existing buildings. Infill development is typically done in dense environments where land is scarce. The slightly broader term “land-recycling” is sometimes used.

Redevelopment - A building or site that involves tear down and rebuilding of most—if not all— structures on that site. This change typically occurs in sought-after areas that are usually well located, where buildings have become unattractive or obsolete or where there is a demand for different uses.

Renovation - Upgrading and modernizing common areas in a building such as lobbies, bathrooms, parking areas, etc. The tenant remains in the building, and the building use and square footage do not change. Renovation is often done together with a retrofit.

Retrofit - Modernization of building systems such as heating, ventilation and air conditioning (HVAC); security; fire alarms; and energy management. The tenant remains in the building, and the building use and square footage do not change. Retrofit is often done together with a renovation.

Speculative - A building developed and constructed without any pre-leasing in place. Construction commences without a pre-lease when the developer believes there is so much demand for that type of building in that market or submarket that a lease commitment is bound to come through.

Sources: The NAIOP Research Foundation, 2017.  “Commercial Real Estate Terms and Definitions.” March, 2017.