The CRE terms thatactually matter.
A short, honest glossary of the commercial-real-estate concepts that show up in every term sheet, lease and underwriting memo – written for principals, not for SEO bots.
Investment & Finance.
8 terms in this category – defined plainly, sourced from real mandates.
02.01 · #cap-rate
Cap Rate (Net Initial Yield)
- Ratio of annual net operating income (NOI) to the property purchase price. A 5.0% cap rate means: with €100k NOI the price is €2.0m. The standard metric used to value and compare commercial-real-estate investments.
02.02 · #noi
NOI (Net Operating Income)
- Effective annual rental income minus non-recoverable operating costs – before financing, tax and capex. Core input for cap rate, DSCR and valuation.
02.03 · #walt
WALT (Weighted Average Lease Term)
- Weighted average remaining lease term across all tenancies, weighted by passing rent. Drives cashflow certainty and therefore price: longer WALT means lower cap rate.
02.04 · #walb
WALB (Weighted Average Lease Break)
- Like WALT, but measured to the next break option instead of contract end. The more conservative view and therefore the metric institutional buyers actually underwrite.
02.05 · #core-core-plus-value-add
Core / Core+ / Value-Add / Opportunistic
- Four risk buckets for CRE investments. Core: fully let, prime, low yield. Core+: mild risk twist. Value-Add: active value creation via re-leasing / refurb. Opportunistic: development / distressed with high return targets.
02.06 · #ltv
LTV (Loan-to-Value)
- Ratio of debt to market value. Standard among German CRE lenders: 55–65% LTV for core, 60–70% for core+. Higher LTV boosts equity return but reduces downside resilience.
02.07 · #dscr
DSCR (Debt Service Coverage Ratio)
- NOI divided by annual debt service. Typical lender covenant: 1.15× to 1.30× depending on asset and lender. A DSCR below 1.0 means cashflow does not cover debt service.
02.08 · #off-market
Off-Market
- Transaction executed without public marketing. Benefits: confidentiality, less competition, often cleaner price discovery. Requires a broker with a real network and client access.
Leasing & Market.
5 terms in this category – defined plainly, sourced from real mandates.
03.01 · #leerstandsquote
Vacancy Rate
- Share of unlet space relative to the total stock of a submarket. Tightness indicator: under 3% is very tight (e.g. prime office Munich), over 10% is loose.
03.02 · #prime-rent
Prime Rent
- The top achievable rent for a top-quality unit in the best location with top spec. Typically defined as the upper quintile of recent deals and quoted in €/sqm/month.
03.03 · #incentives
Incentives
- Concessions a landlord layers on top of the headline rent to close a deal – rent-free periods, tenant-improvement allowance (TI), stepped options. Critical in softer markets; meaningfully reduces the effective rent.
03.04 · #effective-rent
Effective Rent
- Headline rent minus incentives, spread over the lease term. The honest comparable for tenants and investors – a headline rent without an effective rent number tells you very little.
03.05 · #service-charges
Service Charges
- Recoverable operating costs the tenant pays on top of base rent – utilities, cleaning, maintenance, management. In Germany usually paid via monthly advance with an annual reconciliation.
Valuation.
1 terms in this category – defined plainly, sourced from real mandates.
04.01 · #verkehrswert
Market Value
- The most probable price achievable at the valuation date under normal market conditions and free marketing. The reference for bank LTV and accounting; appraised under the German ImmoWertV regulation.
Space & Construction.
2 terms in this category – defined plainly, sourced from real mandates.
05.01 · #bgf
GFA (Gross Floor Area, DIN 277)
- Sum of all floor areas across all storeys – interior and exterior – measured to the outside of exterior walls. The standard for sizing buildings and benchmarking construction volume.
05.02 · #mfg
gif Commercial Rentable Area (MF-G)
- Official rentable area for commercial property under the German gif MF-G guideline. Includes usable area plus a pro-rata share of circulation. The basis for rent calculation and comparing leasing offers.
Legal & Regulation.
2 terms in this category – defined plainly, sourced from real mandates.
06.01 · #mehrwertsteuer-option
VAT Option in Commercial Leases
- Commercial leasing is VAT-exempt by default in Germany. With the §9 UStG option the landlord opts into VAT – only possible if the tenant can reclaim input VAT. Standard in office/logistics, tricky in healthcare.
06.02 · #energieausweis
Energy Performance Certificate (GEG)
- Mandatory energy-performance certificate under the German GEG. Must appear in any marketing exposé. Weak ratings (G/H) materially shrink the pool of buyers and tenants.