COMMERCIAL REAL ESTATE GLOSSARY

Commercial Real Estate Terms You Should Know

Whether you're a first-time investor or a seasoned buyer, understanding commercial real estate terminology is key to making informed decisions. Below is a glossary of commonly used CRE terms you’ll encounter in every deal.

KEY TERMS:

  • Cap Rate (Capitalization Rate)

A measure of investment return. Calculated by dividing net operating income (NOI) by the property price.

  • NOI (Net Operating Income)

Total revenue from a property minus operating expenses. Excludes mortgage payments.

  • NNN Lease (Triple Net)

A lease where the tenant pays for taxes, insurance, and maintenance in addition to rent.

  • LOI (Letter of Intent)

A non-binding document used to express interest and outline key terms before entering a formal contract.

  • TI (Tenant Improvements)

Upgrades or build-outs made for a tenant’s specific use, often negotiated as part of the lease.

  • CAM (Common Area Maintenance)

Fees paid by tenants for upkeep of shared spaces like lobbies, parking lots, or landscaping.

  • 1031 Exchange

A tax-deferral strategy that allows investors to sell and reinvest in similar property without paying immediate capital gains tax.

  • Owner-User Property

A commercial property where the buyer will occupy part or all of the space for their business.

  • Due Diligence

The investigative phase of a transaction that includes reviewing financials, leases, zoning, and inspections.

  • Underwriting

The process of analyzing a property’s income, expenses, and risk profile to determine its investment viability.

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