What Is a Buy Box in Commercial Real Estate?
A buy box is a predefined set of investment criteria that a commercial real estate firm uses to quickly screen incoming deals. It acts as a filter: deals that match the buy box advance to underwriting, while deals that fall outside are killed immediately, saving analyst time and reducing wasted effort.
What Goes Into a Buy Box?
A buy box defines the boundaries of what your firm will and will not pursue. Every parameter serves as a gate: if a deal fails any single criterion, it gets killed before an analyst spends meaningful time on it.
| Parameter | Example Criteria | Why It Matters |
|---|---|---|
| Asset Class | Multifamily, Self-Storage | Determines underwriting model, lending environment, and team expertise |
| Geography | Sunbelt MSAs, Texas, Southeast | Market fundamentals, population growth, regulatory environment |
| Deal Size | 100 to 300 units, $15M to $50M | Matches fund capacity and lender requirements |
| Cap Rate Range | 5.0% to 7.0% going-in | Sets return expectations and risk tolerance |
| Price Per Door | $80K to $150K per unit | Quick sanity check on pricing relative to market and replacement cost |
| Vintage / Year Built | 1985 or newer | Older properties carry higher capex risk (plumbing, electrical, roofing) |
| Occupancy | 85%+ physical occupancy | Below-threshold occupancy signals operational or market problems |
| Deal-Breakers | Flood zone, ground lease, rent control | Hard stops that no amount of return can justify for your strategy |
Why Does Defining a Buy Box Matter?
A clear buy box is the single fastest way to reduce wasted analyst time. Without one, every incoming offering memorandum requires 20 to 30 minutes of review before a kill-or-advance decision. With a defined buy box, that decision takes under 5 minutes.
This matters at scale. A firm receiving 10 to 15 new OMs per week spends 4 to 6 hours just on initial screening if there is no systematic filter. That time compounds: it is hours that could be spent on deeper underwriting of the deals that actually fit.
The NAIOP Research Foundation has published multiple studies on how institutional investors structure their acquisition processes. The common thread across all of them: firms with documented buy boxes close more deals per analyst than firms that screen ad hoc.
How to Build a Buy Box
Start with your fund mandate or investment thesis. Every parameter in your buy box should trace back to a reason your investors gave you capital.
Step-by-Step Process
- Define your asset class focus. Be specific. "Multifamily" is better than "all commercial." "Garden-style multifamily, 100+ units" is better still.
- Set geographic boundaries. Use MSA-level targets, not just states. Know which submarkets you want and which you avoid.
- Establish deal size range. Your minimum should reflect fund economics (acquisition costs need to be justified). Your maximum should reflect equity capacity.
- Set return thresholds. Going-in cap rate, target IRR, equity multiple. These determine which deals can pencil.
- List hard deal-breakers. Flood zones, ground leases, environmental contamination, rent control jurisdictions. These are non-negotiable.
- Define the stretch zone. Which parameters have flexibility? A deal that misses on vintage but exceeds on cap rate might still be worth a look.
Buy Box and Deal Flow Management
Your buy box is only as useful as your ability to apply it consistently. When an offering memorandum arrives, the first question should always be: "Does this fit the box?"
The Urban Land Institute (ULI) recommends that institutional investors formalize their screening process to ensure consistency across team members. When multiple analysts are screening deals, a written buy box prevents style drift where one analyst advances deals another would kill.
Teams that process high deal volume (4 or more new OMs per week) benefit most from automation at this stage. Tools that extract key metrics from OMs and compare them against buy box parameters can reduce screening time from 20 minutes to under 5 minutes per deal, directly cutting the dead deal tax.
Common Buy Box Mistakes
The most common mistake is building a buy box that is either too broad or too narrow. Both waste time, just in different ways.
- Too broad: You advance too many deals into underwriting, overwhelming your team with analysis on deals that will not close.
- Too narrow: You filter out cuspy deals that might outperform. Some of the best acquisitions come from deals that miss one criterion but excel across every other dimension.
- Never updated: Markets shift. A buy box set in 2023 may no longer reflect cap rate realities or market fundamentals in 2026.
- Not shared: If the buy box lives only in the principal's head, analysts waste time guessing. Write it down and distribute it.
Buy Box by Investment Strategy
Different investment strategies require fundamentally different buy boxes. A core fund and an opportunistic fund will screen the same deal and reach opposite conclusions.
| Parameter | Core / Core-Plus | Value-Add | Opportunistic |
|---|---|---|---|
| Occupancy | 93%+ | 80% to 92% | Any (including vacant) |
| Cap Rate | 4.0% to 5.5% | 5.5% to 7.0% | 7.0%+ |
| Vintage | 2000+ | 1985+ | Any |
| Target IRR | 8% to 12% | 13% to 18% | 18%+ |
For a deeper look at how stabilized and value-add properties differ in practice, see our dedicated glossary entry.