Reca commercial complete
exam guide with over 280
questions and answers
Commercial real estate assets have a number of attributes that make them unique relative to other
types of investments. These attributes include the following: (x10)
1. They involve land
2.Transaction time frames are long
3. Transaction costs are high
4. they are expensive
5. They are long lasting
6. Highly regulated
7. have a long production cycle
8. are management intensive
9. are heterogeneous
10. Involve measuring return on investment
1. Long-lasting, Durable Goods
2. Expensive, High-valued (left for well capitalized investors)
3. Transaction Costs: Due diligence and commissions alone comprise about three to five percent of
transaction costs.
4. Transaction Time Frame
5. Land
6. Heterogeneous: every parcel of land is unique so every commercial real estate asset is unique.
However, improvements are rarely identical as unique site characteristics, land use regulations, and
the market often require different solutions from developers.
7. Return Measures
8. Management Intensive
,9. Long Production Cycle: it takes time to develop and construct new commercial real estate assets
to meet the needs of the expanding population. This results in the real estate supply being relatively
slow to respond to changes in demand (i.e. inelastic supply).
10. Highly Regulated
Inelastic supply
there is a limited supply. To illustrate, many cities are geographically constrained and have a Land
Use Bylaw that limits the ability to change the use of a parcel of land. This results in a relatively
inelastic supply of land for commercial purposes. Inelastic supply means the supply cannot readily
adjust to changes in demand or price.
four major commercial real estate asset product types according to Real Capital Analytics
Office: Refers to real estate primarily used for office space
Retail: Refers to retail properties, such as strip centres or neighbourhood, community, regional and
super-regional shopping malls
Industrial: Refers to real estate for industrial use, such as distribution, manufacturing, or warehouse
facilities and data centres
Apartment: Refers to multi-family rental properties.
Other miscellaneous product types include hotels, leisure (e.g golf courses), and special use (e.g.
casinos)
3 miscellaneous product types
hotel, leisure (e.g. golf courses), and special use (e.g. casinos).
Categorization by Building Class
,For example, office properties are often categorized as Class A, B, or C.
Categorization by Number of Storeys
For example, apartment properties are classified as either garden complexes (one or more low-rise
buildings consisting of four storeys or less) or mid/high-rise projects (one or more buildings
consisting of four storeys or greater).
Categorization by building's Property Location
For example, in addition to building class, office properties are often categorized based on their
location as either central business district (CBD) or suburban.
Categorization by building's Type
For example, the International Council of Shopping Centres (ICSC) defines different types of shopping
centres according to size (gross leasable area and land area), types of tenants, and trade area.
The length of time for the Commercial Real Estate Asset Life Cycle process varies considerably
depending on a number of factors, including the following: (x5)
The real estate asset's product type
The size and complexity of the project
The regulatory environment
The need for related infrastructure
The financial and operational capability of the investor(s)
A typical commercial real estate asset undergoes three phases during its life cycle:
, Phase I: Land Acquisition and Development
Phase II: Building Construction
Phase III: Operations and Asset Management
Phase I: Land Acquisition and Development
During Phase I, the developer acquires the land and undertakes the necessary development and pre-
construction work. This involves the following: (x3)
Completing a feasibility analysis
Enlisting the professional services of planning specialists, architects, engineers and contractors, and
marketing experts
Soliciting capital providers (e.g. investors, lenders)
True or False - With the exception of a multi-family project, usually some pre-leasing must be in
place.
True - Capital providers often require pre-leasing, which involves obtaining lease commitments in
advance of construction. In fact, a construction lender may not commit construction funds until
there are leasing commitments for a certain percentage of the space. With the exception of a multi-
family project, usually some pre-leasing must be in place. Once lease up of the rest of the asset is
complete (i.e. full occupancy), most of the risk associated with the development is eliminated.
Four professional organizations that represent both property management and asset management
professionals.
Building Owners and Managers Association (BOMA)
Institute of Real Estate Management (IREM)
National Council of Real Estate Investment Fiduciaries (NCREIF)
exam guide with over 280
questions and answers
Commercial real estate assets have a number of attributes that make them unique relative to other
types of investments. These attributes include the following: (x10)
1. They involve land
2.Transaction time frames are long
3. Transaction costs are high
4. they are expensive
5. They are long lasting
6. Highly regulated
7. have a long production cycle
8. are management intensive
9. are heterogeneous
10. Involve measuring return on investment
1. Long-lasting, Durable Goods
2. Expensive, High-valued (left for well capitalized investors)
3. Transaction Costs: Due diligence and commissions alone comprise about three to five percent of
transaction costs.
4. Transaction Time Frame
5. Land
6. Heterogeneous: every parcel of land is unique so every commercial real estate asset is unique.
However, improvements are rarely identical as unique site characteristics, land use regulations, and
the market often require different solutions from developers.
7. Return Measures
8. Management Intensive
,9. Long Production Cycle: it takes time to develop and construct new commercial real estate assets
to meet the needs of the expanding population. This results in the real estate supply being relatively
slow to respond to changes in demand (i.e. inelastic supply).
10. Highly Regulated
Inelastic supply
there is a limited supply. To illustrate, many cities are geographically constrained and have a Land
Use Bylaw that limits the ability to change the use of a parcel of land. This results in a relatively
inelastic supply of land for commercial purposes. Inelastic supply means the supply cannot readily
adjust to changes in demand or price.
four major commercial real estate asset product types according to Real Capital Analytics
Office: Refers to real estate primarily used for office space
Retail: Refers to retail properties, such as strip centres or neighbourhood, community, regional and
super-regional shopping malls
Industrial: Refers to real estate for industrial use, such as distribution, manufacturing, or warehouse
facilities and data centres
Apartment: Refers to multi-family rental properties.
Other miscellaneous product types include hotels, leisure (e.g golf courses), and special use (e.g.
casinos)
3 miscellaneous product types
hotel, leisure (e.g. golf courses), and special use (e.g. casinos).
Categorization by Building Class
,For example, office properties are often categorized as Class A, B, or C.
Categorization by Number of Storeys
For example, apartment properties are classified as either garden complexes (one or more low-rise
buildings consisting of four storeys or less) or mid/high-rise projects (one or more buildings
consisting of four storeys or greater).
Categorization by building's Property Location
For example, in addition to building class, office properties are often categorized based on their
location as either central business district (CBD) or suburban.
Categorization by building's Type
For example, the International Council of Shopping Centres (ICSC) defines different types of shopping
centres according to size (gross leasable area and land area), types of tenants, and trade area.
The length of time for the Commercial Real Estate Asset Life Cycle process varies considerably
depending on a number of factors, including the following: (x5)
The real estate asset's product type
The size and complexity of the project
The regulatory environment
The need for related infrastructure
The financial and operational capability of the investor(s)
A typical commercial real estate asset undergoes three phases during its life cycle:
, Phase I: Land Acquisition and Development
Phase II: Building Construction
Phase III: Operations and Asset Management
Phase I: Land Acquisition and Development
During Phase I, the developer acquires the land and undertakes the necessary development and pre-
construction work. This involves the following: (x3)
Completing a feasibility analysis
Enlisting the professional services of planning specialists, architects, engineers and contractors, and
marketing experts
Soliciting capital providers (e.g. investors, lenders)
True or False - With the exception of a multi-family project, usually some pre-leasing must be in
place.
True - Capital providers often require pre-leasing, which involves obtaining lease commitments in
advance of construction. In fact, a construction lender may not commit construction funds until
there are leasing commitments for a certain percentage of the space. With the exception of a multi-
family project, usually some pre-leasing must be in place. Once lease up of the rest of the asset is
complete (i.e. full occupancy), most of the risk associated with the development is eliminated.
Four professional organizations that represent both property management and asset management
professionals.
Building Owners and Managers Association (BOMA)
Institute of Real Estate Management (IREM)
National Council of Real Estate Investment Fiduciaries (NCREIF)
