Resource Guide

Healthcare Real Estate Glossary.

Common terms and definitions used in healthcare real estate transactions.

Jump to Section

MOB (Medical Office Building): A commercial building designed or adapted for medical tenants. May be single or multi-tenant, on or off a hospital campus.
ASC (Ambulatory Surgery Center): A licensed healthcare facility where surgical procedures are performed on an outpatient basis. Requires specialized infrastructure including OR suites, recovery areas, and sterile processing.
Imaging Center: A facility housing diagnostic imaging equipment such as MRI, CT, X-ray, ultrasound, or mammography. Requires specialized electrical, HVAC, and often radiation shielding.
Urgent Care: A walk-in medical facility providing immediate care for non-life-threatening conditions. Typically 2,500–5,000 SF with extended hours.
FSF (Free-Standing Facility): A medical building not attached to or part of a hospital campus.
On-Campus MOB: A medical office building located on a hospital's campus, often with direct connections or proximity to hospital services.
Off-Campus MOB: A medical office building not located on a hospital campus, serving community-based care.

NNN (Triple Net): Tenant pays base rent plus their proportionate share of property taxes, insurance, and common area maintenance (CAM). Most common structure for medical office.
Full Service / Gross Lease: Landlord includes most or all operating expenses in the base rent. Less common in healthcare.
Modified Gross: A hybrid where some expenses are included in rent and others are passed through to tenants.
Base Rent: The fixed rental amount before any pass-through expenses.
CAM (Common Area Maintenance): Shared expenses for maintaining common areas: lobbies, parking lots, landscaping, elevators, etc.
Expense Stop: A threshold above which tenants pay their share of increased operating expenses.
Rent Escalation: Annual increases to base rent, typically 2.5–3.5% for healthcare leases.

TI Allowance: A landlord contribution toward the tenant's build-out costs, typically expressed as dollars per rentable square foot. Healthcare TI allowances typically range from $30–$100+ per SF depending on condition and lease term.
Turn-Key: Landlord delivers a fully built-out space to tenant's specifications.
Vanilla Shell / Cold Shell: Bare space with minimal improvements—concrete floor, basic HVAC, no interior build-out.
Warm Shell: Space with basic improvements completed: HVAC, electrical, restrooms, but no tenant-specific build-out.
Build-to-Suit: New construction designed specifically for a tenant's requirements.
Amortized TI: Additional tenant improvement dollars provided by landlord and repaid by tenant through higher rent over the lease term.

RSF (Rentable Square Feet): The space you pay rent on, including your proportionate share of common areas.
USF (Usable Square Feet): The actual space within your suite that you occupy.
Load Factor: The percentage added to usable square feet to calculate rentable square feet. Typically 10–20% for MOBs.
Space Programming: The process of determining room sizes, adjacencies, and overall space requirements for a healthcare facility.
Adjacency: The relationship between spaces—which rooms need to be near each other for efficient workflows.

Lease Term: The duration of the lease. Healthcare leases typically run 7–15 years due to build-out costs.
Commencement Date: The date the lease officially begins (rent starts).
Rent Commencement: When rent payments begin—may be after a build-out period.
Renewal Option: The right to extend the lease for additional terms at predetermined conditions.
Expansion Option: The right to lease additional space in the building if it becomes available.
Right of First Refusal (ROFR): The right to match any offer a landlord receives on adjacent or other space.
Right of First Offer (ROFO): The right to make the first offer on space before the landlord markets it to others.
Exclusivity Clause: Protection preventing the landlord from leasing to competing uses in the building.
Assignment: Transferring the lease to another party.
Sublease: Renting part or all of your space to another tenant while remaining responsible for the master lease.

HVAC: Heating, ventilation, and air conditioning systems.
After-Hours HVAC: Climate control outside normal building hours—important for practices with extended hours or weekend operations.
Electrical Capacity: The power available to a space, measured in amps or watts. Imaging equipment often requires 400+ amp service.
Radiation Shielding: Lead or other materials installed in walls, floors, and ceilings around X-ray, CT, and similar equipment.
OSHPD: Office of Statewide Health Planning and Development—California agency that reviews and approves construction for certain healthcare facilities.
ADA: Americans with Disabilities Act—federal law requiring accessible design for people with disabilities.
ICRA: Infection Control Risk Assessment—protocols for construction in or near occupied healthcare spaces to prevent contamination.
CON (Certificate of Need): State approval required in some states before building or expanding certain healthcare facilities.

LOI (Letter of Intent): A non-binding document outlining the basic terms of a proposed lease or sale.
RFP (Request for Proposal): A formal request sent to landlords or developers soliciting proposals for space.
Due Diligence: The investigation period to verify property conditions, financials, and other factors before finalizing a transaction.
Estoppel Certificate: A document where a tenant confirms the terms and status of their lease—typically required during property sales.
SNDA: Subordination, Non-Disturbance, and Attornment Agreement—an agreement protecting a tenant's lease rights if the property is foreclosed or sold.

Cap Rate: Capitalization Rate—a measure of investment return: Net Operating Income ÷ Purchase Price. Lower cap rates indicate lower risk/higher prices.
NOI (Net Operating Income): Property income minus operating expenses, before debt service.
WALT: Weighted Average Lease Term—the average remaining lease term across all tenants, weighted by rent or square footage.
Credit Tenant: A tenant with strong financials—typically investment-grade rated healthcare systems or national practices.
Sale-Leaseback: An owner sells their property and simultaneously leases it back from the buyer.

Have questions about healthcare real estate terminology?

This glossary is provided by HealthMed Realty as a general reference. Terms may vary by market and transaction type.