Resources
Glossary
Here are some common commercial and multi-unit real estate terms defined to help visitors understand the industry better:
1. Commercial Real Estate (CRE):
• Commercial real estate refers to properties that are primarily used for business or income-generating purposes, rather than residential use. This category includes office buildings, retail spaces, industrial warehouses, and more.
2. Cap Rate (Capitalization Rate):
• The cap rate is a metric used to evaluate the potential return on investment for a commercial property. It is calculated by dividing the property's net operating income (NOI) by its current market value or acquisition cost. A higher cap rate typically indicates a potentially higher return, but it may also signify higher risk.
3. Net Operating Income (NOI):
• NOI is the income generated by a commercial property after deducting operating expenses, but before accounting for financing costs, taxes, and depreciation. It is a key metric in assessing the property's profitability.
4. Lease:
• A lease is a legal agreement between a property owner (landlord) and a tenant, outlining the terms and conditions for renting or leasing the property. Commercial leases often have longer terms and may include specific provisions regarding rent increases, tenant improvements, and responsibilities.
5. Tenant Improvements (TIs):
• Tenant improvements are alterations or renovations made to a commercial property to meet the needs of a tenant. These improvements can range from minor cosmetic changes to major structural modifications and are often negotiated between the landlord and tenant as part of the lease agreement.
6. Triple Net Lease (NNN Lease):
• In a triple net lease, the tenant is responsible for paying not only the rent but also all operating expenses associated with the property, including property taxes, insurance, and maintenance costs. Landlords typically receive a predictable net income in such leases.
7. Common Area Maintenance (CAM):
• CAM charges are additional fees paid by tenants in a commercial property to cover the maintenance and operation of common areas, such as parking lots, hallways, and shared amenities. These charges are typically pro-rata based on a tenant's leased space.
8. Vacancy Rate:
• The vacancy rate represents the percentage of unoccupied rental units or space within a commercial property or real estate market. It is an important indicator of supply and demand dynamics.
9. Commercial Real Estate Broker:
• A commercial real estate broker is a licensed professional who specializes in facilitating transactions for commercial properties. They assist both buyers and sellers in negotiating deals and can provide market insights and property evaluations.
10. Multi-Unit Property:
• A multi-unit property is a real estate asset that consists of multiple residential or commercial units within a single structure. Examples include apartment buildings, townhouses, and multi-tenant retail centers.
11. Gross Rent Multiplier (GRM):
• GRM is a formula used to assess the potential value of an income-generating property. It is calculated by dividing the property's purchase price by its gross rental income. A lower GRM may indicate a potentially better investment opportunity.
12. Commercial Mortgage:
• A commercial mortgage is a loan specifically designed for purchasing or refinancing commercial real estate. These loans often have different terms and requirements compared to residential mortgages.
These definitions should provide a basic understanding of some common terms in the commercial and multi-unit real estate industry. However, the field is vast and diverse, and additional terminology and concepts may apply depending on the specific type of property and market conditions.