Definitions of terms used throughout Building
Commercial real estate (CRE) is property used for business-related purposes. It is most often leased to tenants to conduct income-generating activities. Individuals, companies, and corporate interests can make money from CRE by leasing it out, holding it and reselling it.
Commercial real estate is typically categorized into four classes, depending on function: Office Space, Industrial Use, Multifamily Rental, and Retail. These classes can be further classified depending on the specific use case.
Commercial real estate can also be categorized by the quality of the property. Class A represents the best buildings in terms of aesthetics, age, quality of infrastructure, and location. Class B buildings are usually older and not as competitive—price-wise—as class A buildings. Investors often target these buildings for restoration. Class C buildings are the oldest, usually more than 20 years of age, located in less attractive areas, and in need of maintenance.
The full lifecycle of real estate refers to the entire process of developing, operating, and divesting a real estate property. Building further classifies these into six stages: Concept Development, Feasibility, Planning & Financing, Project Construction, Hand Over (Operations or Sale), and Operations.
Building Information Modeling (BIM) is a collaborative process that allows architects, engineers, real estate developers, contractors, manufacturers, and other professionals to plan, design, and construct a building within one 3D model.
Underwriting can refer to the vetting process by which a sponsor or investor evaluates a real estate deal or the process a lender uses to determine the creditworthiness of a potential customer. In both cases, the real estate developer's credentials, return projections, assumed income and operating expenses, and floor plans will be assessed.
Liquidity refers to the efficiency or ease with which an asset or security can be converted into cash without affecting its market price. The more liquid an asset is, the easier and more efficient it is to turn it back into cash.
Financial instruments may be divided into two types: cash instruments and derivative instruments. The value of a cash instrument is directly determined by the markets. Derivative instruments are based on the performance of an underlying asset, interest rate, or index. Financial instruments also come in different classes, debt-based, equity-based, and foreign exchange.