Did you know that the word “biscuit” refers to a cookie in the United Kingdom? Or that “handy” is a cell phone in Germany? Different words have different meanings in different countries. This is why perspective is so important—even in the commercial real estate industry.
Just because you’re using the same terminology as another CRE professional doesn’t mean you’re speaking the same language. Let’s take a look at a few common terms thrown around in the CRE industry and see how three different roles (investors, property managers and brokers) define them.
Term #1: Operating Expenses
Compstak defines this term from the broker perspective as “all expenses that are incurred during the regular operation of a commercial property.” It seems pretty straightforward, but the broker may be talking about a higher-level view of these expenses than the investor, who might want to know all the granular details. This word has a double meaning for property managers, however, as it relates directly to the daily tasks that come with managing a property. So when you say “operating expenses,” make sure everyone knows exactly what you’re talking about.
Term #2: Common Area Maintenance (CAM)
Here’s another term that can be slightly subjective. The property manager will spend the most time on the property and will have opinions about what qualifies as a “common area.” Brokers might view these in general categories instead of areas, such as landscaping or snow removal. Investors may think residents have more responsibilities than the property manager. These different perspectives are a big reason why there are caps on CAM charges each year.
Term #3: Zoning
This is another term that affects all three roles, but means something different to each of them. The broker might think about the land in a particular region or area affected by zoning, while the investor might think about what types or properties are allowed to be developed according to zoning laws. The property manager might think about practical results of zoning, such as parking and entryway dimensions. Zoning is a broad term with multiple applications.
Term #4: CRE Technology
Finally, a term that can vary wildly. This is usually defined according to the roles and responsibilities of the individual—as well as personal history with technology. Brokers may focus on tools that can automate metrics like cap rate, net operating income and DSCR. Investors likely think of property listing and evaluation tools where they can easily see what’s for sale in a given market. Property managers will think about CRE technology that makes day-to-day life easier, such as date tracking and maintenance management. The good news is that all of these can be found in a single CRE technology solution, if you know where to look.
Need a translator for all the other CRE terms and metrics out there? Gain a new perspective when you schedule a demo of Quarem today.
