Commercial property investments offer significant opportunities, but it also comes with a complex vocabulary. Whether you're advising clients, reviewing lease agreements, or evaluating income potential, a clear understanding of commercial property and investment terminology is essential.

Our Property Investment Glossary breaks down key metrics and terminology you’ll need to know when considering property investments.

Anchor Tenants

Large, stable tenants who draw traffic and increase the property’s attractiveness (e.g. Woolworths, Bunnings).
Use: These tenants often secure long leases and boost valuation.

Cash-on-Cash Return

Annual pre-tax cash income divided by total cash invested.
Formula: (Annual Cash Flow ÷ Cash Invested) × 100
Use: Key for assessing equity efficiency, especially in leveraged deals.

Effective Rent

Actual rental income received after incentives are factored in.
Use: Key for fair property valuation and ROI calculations.

Gross Yield

Annual rental income as a percentage of the property's purchase price.
Formula: (Annual Rent ÷ Purchase Price) × 100
Use: A high-level look at income potential.

Internal Rate of Return (IRR)

Average annual return over the life of the investment, accounting for timing of income and capital growth.
Use: Best for comparing investment scenarios with varied cash flows.

Lease Incentives

Concessions to tenants such as rent-free periods or fit-out contributions.
Use: Common in competitive leasing markets to attract tenants.

LFR (Large Format Retail)

Retail formats typically including bulky goods retailers like BCF, Officeworks, or furniture outlets.
Use: Usually have long leases and benefit from strong national tenant covenants.

MAT (Moving Annual Turnover)

A tenant’s total sales over the previous 12 months, usually reported monthly.
Use: Vital in retail leases for evaluating performance and determining rent escalations or break clauses.

Net Yield

Rental income after deducting outgoings, shown as a percentage of purchase price.
Use: A more accurate view of investment return.

Occupancy (Occ) Cost %

The percentage of a tenant’s gross turnover spent on rent and outgoings.
Formula: (Annual Rent + Outgoings) ÷ Tenant Turnover × 100
Use: Helps evaluate rent affordability and sustainability. Lower percentages usually indicate a more viable long-term lease.

Occupancy Rate

Percentage of the property's net lettable area (NLA) currently leased.
Use: Indicates asset performance and demand.

Outgoings

Costs borne by the landlord, often recoverable from tenants under net leases (e.g. rates, insurance, maintenance).
Use: Important in net vs gross lease comparisons.

Percentage Rent

A lease clause where rent is partly based on a percentage of the tenant’s turnover, often in addition to base rent.
Use: Common in retail centres; aligns landlord and tenant incentives and rewards strong tenant sales.

QSR (Quick Service Restaurants)

Fast food and drive-through operators such as Hungry Jack’s, KFC, or McDonald’s.
Use: High-traffic tenants with consistent trade; often on long-term leases.

WALE (Weighted Average Lease Expiry)

Average time to lease expiry, weighted by rental income.
Use: A longer WALE means greater income security.