Reference
CRE terms & definitions
A working glossary for commercial real estate. Search or jump by letter; terms link to our calculators where useful.
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A
- Absorption (Net Absorption)
- The net change in occupied commercial space over a period — space leased minus space vacated. Positive absorption signals expanding demand.
- Ad Valorem Tax
- A property tax assessed “according to value,” based on the assessed value of the real estate.
- Amortization
- The gradual repayment of a loan’s principal over time through scheduled payments. Build a full schedule with the amortization tool.
- Anchor Tenant
- A large, established tenant (often a grocer or big-box retailer) that drives traffic to a retail center and helps secure financing and smaller tenants.
- Appraisal
- An independent professional opinion of a property’s market value, typically required by a lender before closing.
- Assignment
- The transfer of a lease or contract rights from one party to another, usually subject to landlord consent.
B
- Base Rent
- The fixed minimum rent a tenant pays, before additional charges such as NNN expenses or percentage rent.
- Broker Opinion of Value (BOV)
- A broker’s supported estimate of a property’s likely sale price — less formal and less costly than a full appraisal.
- Build-to-Suit
- A development arrangement in which a building is constructed to a specific tenant’s specifications, usually under a long-term lease.
C
- Capital Expenditures (CapEx)
- Funds spent on major, long-lived improvements (roof, HVAC, parking) rather than routine operating costs.
- Capitalization Rate (Cap Rate)
- Net operating income divided by value or price, expressing unleveraged annual return. Solve any variable with the cap rate calculator.
- Cash-on-Cash Return
- Annual pre-tax cash flow divided by total cash invested — a leveraged measure of an investor’s return.
- Class A / B / C
- A quality grading of commercial buildings by age, condition, location, and amenities, from premier (A) to older or functional (C).
- Common Area Maintenance (CAM)
- Charges billed to tenants for the upkeep of shared areas such as parking lots, lobbies, and landscaping.
- Comparables (Comps)
- Recent sales or leases of similar properties used to estimate value or market rent.
- Concession
- An incentive a landlord offers to win a lease, such as free rent or an improvement allowance.
- Core / Core-Plus / Value-Add / Opportunistic
- Risk-and-return categories for real estate investment, from stabilized, low-risk (core) to higher-risk repositioning or development (opportunistic).
D
- Debt Service
- The total principal and interest payments due on a loan over a given period.
- Debt Service Coverage Ratio (DSCR)
- Net operating income divided by annual debt service; lenders commonly require 1.20–1.25x or higher. Check it with the DSCR calculator.
- Due Diligence
- The investigation period in which a buyer verifies a property’s physical, financial, legal, and environmental condition before closing.
E
- Easement
- A legal right to use another party’s land for a specific purpose, such as access or utilities.
- Effective Gross Income (EGI)
- Potential gross income less vacancy and credit losses, plus other income — the income available before operating expenses.
- Entitlements
- Government approvals (zoning, permits, variances) that allow a property to be developed or used in a particular way.
- Escrow
- Funds or documents held by a neutral third party until the conditions of a contract are satisfied.
- Estoppel Certificate
- A signed tenant statement confirming lease terms and status, often required by lenders or buyers during a transaction.
F
- Fair Market Value
- The price a willing, informed buyer and seller would agree to, with neither under compulsion to act.
- Full-Service (Gross) Lease
- A lease in which the landlord pays operating expenses — taxes, insurance, and maintenance — and the tenant pays one all-in rent.
G
- Gross Rent Multiplier (GRM)
- A property’s price divided by its gross rental income — a quick screen for relative value.
- Ground Lease
- A long-term lease of land on which the tenant builds and owns improvements that typically revert to the landowner at the end of the term.
H
- Hard Costs
- Direct construction costs for labor and materials.
- Highest and Best Use
- The legally permissible, physically possible, and financially feasible use that produces a property’s greatest value.
- Holdover
- A tenant that remains in a space after lease expiration, often at a premium “holdover” rent.
I
- Internal Rate of Return (IRR)
- The discount rate at which an investment’s net present value equals zero — a time-weighted measure of return.
J
- Joint Venture (JV)
- A partnership in which two or more parties combine capital and expertise to pursue a real estate project.
L
- Letter of Intent (LOI)
- A usually non-binding document outlining the key terms of a proposed lease or purchase ahead of a formal contract.
- Leverage
- The use of borrowed capital to amplify potential returns — and risk — on invested equity.
- Lien
- A legal claim against a property securing a debt, which generally must be cleared before a sale can close.
- Loan-to-Value (LTV)
- The loan amount divided by the property’s value or price, expressing how much of the purchase is financed.
M
- Mixed-Use
- A property that combines multiple uses — such as retail, office, and residential — within one project.
- Modified Gross Lease
- A lease that splits operating expenses between landlord and tenant, sitting between a gross and a net lease.
N
- Net Operating Income (NOI)
- A property’s income after operating expenses but before debt service and income taxes — the basis for value and cap rate.
- Non-Recourse Loan
- A loan secured only by the property; on default the lender generally cannot pursue the borrower’s other assets.
O
- Occupancy Rate
- The share of leased or occupied space in a property or market — the inverse of the vacancy rate.
- Operating Expenses (OpEx)
- Recurring costs to run a property, including taxes, insurance, utilities, management, and maintenance.
- Opportunity Zone
- A federally designated area offering capital-gains tax incentives for qualifying long-term investments.
P
- Percentage Rent
- Additional retail rent calculated as a percentage of a tenant’s sales above an agreed breakpoint.
- Pro Forma
- A projected financial statement estimating a property’s future income, expenses, and returns.
R
- Recourse Loan
- A loan under which the lender can pursue the borrower’s personal or other assets if the collateral falls short.
- Rent Roll
- A schedule of all tenants, lease terms, rents, and expiration dates for a property.
- Replacement Cost
- The cost to rebuild a comparable property at today’s prices — used in valuation and insurance.
- Reserves
- Funds set aside for future capital repairs or to cover operating shortfalls.
- RevPAR (Revenue Per Available Room)
- A hotel performance metric equal to occupancy multiplied by average daily rate.
S
- Sale-Leaseback
- A transaction in which an owner sells a property and simultaneously leases it back, freeing capital while retaining use.
- Soft Costs
- Indirect project costs such as design, legal, financing, and permitting fees.
- Sponsor
- The party that organizes, capitalizes, and manages a real estate investment on behalf of its partners or investors.
- Submarket
- A smaller, defined geographic area within a larger market, with its own supply, demand, and pricing dynamics.
T
- Tenant Improvements (TI)
- Customizations made to ready a leased space for a tenant; a TI allowance is the landlord’s contribution toward that work.
- Tenant Representation
- Brokerage services representing tenants — rather than landlords — in site selection and lease negotiation.
- Triple Net Lease (NNN)
- A lease in which the tenant pays base rent plus its share of property taxes, insurance, and maintenance.
U
- Usable vs. Rentable Square Footage
- Usable area is the space a tenant actually occupies; rentable area adds a share of common areas and is the basis for rent.
V
- Vacancy Rate
- The share of available, unoccupied space in a property or market over a period.
- Value-Add
- An investment strategy of increasing a property’s income and value through renovation, releasing, or better management.
Y
- Yield
- The income return on an investment, expressed as a percentage of its cost or value.
Z
- Zoning
- Municipal regulations that govern how land within specific districts may be used and developed.
Definitions are provided for general information and education and may vary by market, lender, and contract. For guidance on a specific deal, talk to a CURO advisor.
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