Commercial Real Estate Terms You NEED To Know in 2023

Commercial Real Estate Terms You NEED To Know in 2023 // When I first got started in commercial real estate, sometimes I felt like I was listening to an entirely different language when sitting in meetings, and there's definitely some industry “lingo” that you’re going to need to learn if you're just getting started in the business.
And right now (given the current state of the market), there are a few specific terms that are being thrown around a lot in today’s environment that you won’t necessarily find in a textbook, but you’re going to want to know to keep up with the conversation.
So to make sure that you’re in the loop when these things come up in meetings, conversations with your manager, or even in an interview, in this week's video, I want to walk through 4 different commercial real estate terms (and groups of terms) that are particularly important in 2023, and what each of these are referring to in the context of today’s commercial real estate market.
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🕒 Timestamps 🕒
0:00 Introduction
0:53 Pricing Terminology
2:50 Yield Expectation Terminology
4:15 Risk Terminology
5:33 Lending Terminology
8:02 How To Land a Job in Commercial Real Estate
#commercialrealestate #realestateinvesting
*Nothing in this video should be construed as tax, legal, accounting, valuation, or financial advice or recommendation. All information in this video is intended solely for educational purposes, and you are advised to consult with your own personal professional advisors regarding your personal investment decisions.
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Research and articles referenced in this video:
www.cbre.com/insights/reports...

[@BreakIntoCRE]

Any other terms or concepts you'd like to see covered in more detail in a future video?

[@mikefeir]

Hedge agreements

[@gennerobootz6490]

I just went from residential real estate into commercial real estate and it’s a whole different ball game and I love it I’m finally dealing with serious people and it’s not easy but I prefer that

[@Jsap36_1]

Congrats on the job. Do you have any tips for others trying to transition from residential to commercial?

[@rolininthemud]

Bid-Ask Spread: Difference between what sellers are accepting and what buyers are offering - Wide bid-ask spread = large difference between the bid and the ask. This leads to less transaction activity Price Discovery: Time period where significant bid-ask spread exists. Cap Rate Compression: Cap rates decreasing in the market - Investors are willing to accept lower cap rates Cap Rate Expansion: Cap rates increasing in the market - Investors are requiring higher going-in NOI yields Risk Premium: Incremental return over the assumed risk-free rate (usually the equivalent term US treasury yield) Widening/Tightening lending spreads: Loan interest rate = "spread" + risk-free rate. This is the increase or decrease in that spread

[@TechInRealEstate]

This is very helpful! Thank you

[@laurencedo1817]

Thanks Justin. Another words that I’m hearing a lot are trended & untrended yield on cost

[@realestateinvestingtips]

Thanks for sharing this helpful video on key terms in commercial real estate! It's crucial to stay up to date on these conversations, and the terms you mentioned - bid ask spread, price discovery, cap rates, yield expectation, cap rate compression, cap rate expansion, and risk premium - all sound like they play important roles in the industry. Understanding the bid ask spread and price discovery is especially important in today's market with a significant spread leading to a slowdown in transaction activity. It's also interesting to learn about cap rate compression and expansion and how they reflect changes in market cap rates and investors' willingness to accept lower initial yields. Finally, the concept of risk premium is crucial to consider when making investments. Thanks again for sharing this valuable information!

[@888success]

can you talk how to read a investment report - where is their key point and whether the US portfolio is performing to expectation, thank you - KC Sim

[@ibrahimdaas]

Hi Justin.. I liked your courses in UDEMY ... but are you going to make a Hotel Acquisition Financial Modeling course soon?

[@spencerberan9551]

Thank you for all the videos, emails, and courses! I was able to land an internship with JLL and without your knowledge I don’t know if I would have been picked. Keep up the great work!

[@BreakIntoCRE]

Congrats, Spencer!!

[@kaitlynfeeney7764]

Thank you for all your videos, they have helped immensely during my first few months in this field

[@BreakIntoCRE]

Great to hear they've been helpful, Kaitlyn!

[@Kurt-rg8jq]

"Underwriting" was embarrassingly the hardest concept for me to understand starting out as I had nobody in my family/friends/life or school that taught me this concept. It didn't click until I started to do UW myself. Most intimidating thing is not knowing what UW is then getting sent a full UW model. I def learned the hard way.

[@BreakIntoCRE]

This is way more common than you'd think, and also took me a few months in my first non-transactional role for this to "click". You're not alone!

[@fabianayala7740]

Excellent job at explaining this 🙌

[@BreakIntoCRE]

Thanks, Fabian!

[@jamesschultz5731]

Love your content. Negative leverage could make this list as well.

[@BreakIntoCRE]

Great point!

[@888success]

thank you

[@van8000]

I have a few important questions about NNN properties. I would like to pay you for your time. If you have time and want to help out, please let me know. Thank you and I hope to see your respond

[@waelwellie7057]

Amazing informative content, I strongly suggest making a podcast, and Twitter account where Spaces can be done, it’s like an open discussion where everyone can share their experience and knowledge from all over the world 🌍

[@BreakIntoCRE]

Great feedback, thank you!

[@Walina-gv9ph]

A cap rate is not an unlevered yield. You are confusing it with Cash on Cash that is unlevered. Cap rate is exactly the same if you pay cash or finance 100%. It is a valuation metric.

[@jaromejordan7943]

FALSE! Cap rate is the unlevered yield. Cap rate = NOI/purchase price, Which is the INITIAL NOI YIELD aka unlevered yield. He is very correct in his explanation.

[@Walina-gv9ph]

@@jaromejordan7943 Cap rates come from an income approach to VALUE The formula is V=i/r In a 10 cap market investors have paid $10 for a possible dollar of NOI $10=$1/10% In a 5 cap market investors have paid $20. $20=$1/5% See it is used to value NOI. It is not a rate of return. Think about it, why would an investor pay TWICE as much ($20) for HALF the "return" (5%)? Answer that and you will correctly understand cap rates.

[@logicalhuman6761]

@@Walina-gv9ph The answer to your question is because of risk. You also didn’t address leverage in your response… leverage is factored in below the line of NOI.

[@Walina-gv9ph]

@@logicalhuman6761 So a cap rate is NOT a "return"? You think it is a risk measurement. Is a 10 cap TWICE as risky as a 5 cap? Nah, cap rates are a valuation metric. It tells you to the penny what NOI traded for. That's it!! Now show me how leverage is factored below the line. Sounds crazy but I'd like to see your input.

[@jaromejordan7943]

@@Walina-gv9ph you have to be trolling at this point 😂. You literally repeated the formula I used. I hope you realize the 10% or 5% used in your example is the yield you get for the income on the property... Also cap rates does give you an indication of risk. A 10 cap market is very much riskier than a 5 cap market due to various of reasons. There's books and KZbin videos you can watch to understand this. It's very clear you only have a basic understanding of what a cap rate is...