10 CRE Terms Every Agent Needs to Know
By Khai Tran | Category: CRE | 5 min read
Before you can confidently discuss commercial real estate, you need to speak the language. Here are the 10 essential terms every residential agent should master.
1. Cap Rate (Capitalization Rate)
NOI divided by property price. A 7% cap rate means the property returns 7% annually. Lower cap rates typically indicate lower risk, higher-quality properties.
2. NOI (Net Operating Income)
Gross income minus operating expenses. Does not include debt service. This is the primary metric for evaluating commercial property performance.
3. NNN (Triple Net Lease)
Tenant pays rent plus property taxes, insurance, and maintenance. Most favorable for landlords. Common in retail and single-tenant properties.
4. Gross Lease
Tenant pays flat rent; landlord covers all operating expenses. Common in multi-tenant office buildings.
5. Modified Gross Lease
Hybrid of NNN and gross. Tenant and landlord split certain expenses. Terms vary by agreement.
6. Price Per Square Foot
Standard comparison metric. Total price divided by square footage. Essential for comparing properties.
7. CAM (Common Area Maintenance)
Shared expenses for common areas in multi-tenant properties. Includes landscaping, parking lot maintenance, etc.
8. Due Diligence Period
Time for buyer to inspect and verify property details. Typically 30-90 days in commercial transactions.
9. Tenant Improvements (TI)
Modifications made to property for tenant needs. Often negotiated as part of lease terms.
10. Letter of Intent (LOI)
Non-binding document outlining deal terms before formal contract. Standard starting point for negotiations.
Download Free CRE Terms Guide