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Commercial Real Estate Glossary



Break-even point

The stage at which an investment produces an income that is just sufficient to cover recurring expenditure. For an investment in real property, the point at which gross income is equal to normal operating expenses, including debt service (the stage at which the next cash flow becomes positive). Also known as the default point. (Encyclopedia of Real Estate Terms 2nd Edition, Damien Abbott)


The sales threshold over which percentage rent is due. It is calculated by dividing the annual base rent by the negotiated percentage applied to the tenant’s gross sales.

Business risk

The uncertainty associated with the possible profit outcomes of a business venture.

Buy/rent threshold

The point at which there is a recognizable shift of expenditure allocations away from owner occupied housing and to the rental housing market (or vice-versa) as a result of changing market conditions.


See common area maintenance.

CAM cap

The maximum amount for which the tenant pays its share of common area maintenance costs. The owner pays for any CAM expenses exceeding that amount.

Cap rate

See capitalization rate.

Capital expenditures

Property improvements that cannot be expensed as a current operating expense for tax purposes. Examples include a new roof, tenant improvements, or a parking lot—such items are added to the basis of the property and then can be depreciated over the holding period. Distinguished from cash outflows for expense items such as new paint or plumbing repairs (operating expenses) that can be expensed in the year they occur. Also see operating expenses.

Capital gain

Taxable income derived from the sale of a capital asset. It is equal to the sales price less the cost of sale, adjusted basis, suspended losses, excess cost recovery, and recapture of straight-line cost recovery.

Capital market

The supply and demand for resources to invest in real estate and other investments.

Capitalization rate

A percentage that relates the value of an income-producing property to its future income, expressed as net operating income divided by purchase price. Also referred to as cap rate.

Capital tax

Any tax on a change in capital value (including capital gains tax, estate tax, or inheritance tax); as distinguished from a tax on income. (Encyclopedia of Real Estate Terms 2nd Edition, Damien Abbott)

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