Commercial Real Estate (CRE) Definition

CRE, or commercial real estate, is a term used to describe the physical property and space used for conducting business. The definition of CRE can be broad, as it includes everything from office buildings and retail spaces to warehouses and farmland. In most cases, when people talk about CRE, they're referring to the leasing and management of these properties. However, investing in CRE has also become a popular way to diversify one's portfolio. Whether you're new to the world of CRE or just looking for a refresher course, check out our latest blog post for a more in-depth look at this exciting industry!

CRE Transaction Types

When it comes to CRE, the most common transactions usually fall under either of two categories: acquisition or disposition. Acquisition deals typically involve a buyer purchasing a property from a seller for an agreed upon price. Disposition deals, on the other hand, occur when a seller agrees to accept a certain amount of money in exchange for relinquishing all rights and title to a property. Like any type of commercial transaction, both acquisition and disposition deals have their own unique terms and processes that can vary depending on the state or country where they're executed as well as which party is involved.

Commercial Real Estate Trends

As one would expect from such a massive industry, there are some pretty significant trends impacting CRE as we move further into the 21st century. As the economy has shifted its focus from manufacturing to technology, many traditional office spaces have begun shifting their focus towards co-working and shared business initiatives. This has led to the rise of what's known as "third place" offices, which are specifically designed with this type of collaborative environment in mind. Many firms are also beginning to follow a more high-tech approach when it comes to their real estate portfolios by integrating innovative software into their current processes. All of these changes have had a significant impact on CRE professionals, who will need to adapt if they hope to keep pace with these developments.

 

CRE Transactions

The term “transaction” refers simply to any change in the ownership of an asset or property, whether that change involves the addition or removal of a single owner, an outside investor, or multiple owners transferring their respective stakes to one another.

CRE Transactions - Acquisition & Disposition

The most common type of commercial real estate transaction is what's known as an acquisition or disposition deal. An acquisition deal is typically used when a buyer purchases a property from a seller for an agreed upon price, whereas a disposition deal occurs when a seller agrees to accept money in exchange for relinquishing all rights and title to the property. There are other types of transactions, such as refinancing deals and construction financing deals, but they represent only a small minority within the CRE world.

CRE Transaction Process

The transaction process is the set of steps taken to transfer a property from one entity or individual to another. Each CRE transaction has its own particular steps and criteria that must be met in order for it to go through, which can vary depending on whether the buyer and seller are working with each other, an outside investor, or some combination of parties. While this may sound simple enough, keep in mind that commercial real estate deals tend to have a much higher risk factor than consumer transactions. So before you start browsing available properties online, make sure you understand everything there's to know about CRE transactions so you don't get lost along the way.

CRE Transaction Terms

There are a handful of terms that you'll need to understand in order for you to have a thorough grasp of the CRE transaction process. Some of these terms include "Escrow," which refers to an account used to hold both the funds paid by the buyer and the legal documents representing the property being purchased. Another term, "Earnest Money," refers to any money put forth by either party during the initial stages of negotiation with each payment typically being accompanied by a letter that details what it can be used for. And lastly, "Due Diligence" is simply when one or all parties involved in a CRE transaction closely examine all aspects of it before agreeing to move forward with it. The more familiar you are with these terms, the more prepared you'll be to make smart decisions when you're ready to invest in CRE!