Commercial real estate can be a lucrative investment. The term commercial real estate encompasses several different types of properties, all of which serve very different business and functions. These types of properties are divided into four main categories.
Multi-family properties are properties composed of multiple units, or dwellings. All the units are part of a single structure. One type of multi-family properties are apartments. Most of the time, apartment buildings are considered residential, but if they have five or more units they are considered commercial properties. The reason for this is that the owner uses the rental units to earn income, rather than living in them.
Multi-family properties are categorized as urban or suburban, and by how many stories the building has. Garden properties are less than four stories, mid-rise properties are between five and seven stories, and high-rise properties are over seven stories.
Office buildings are another option for commercial real estate investors. Offices typically include cubicles, conference rooms, and other meeting areas. Unlike multi-family apartment leases, office leases tend to be long-term. The Building Owners and Managers Association (BOMA) has divided office buildings into three groups to encourage proper reporting of the working conditions. These groups tend to be guidelines rather than strict categories. They are subjective and depend on local markets and neighborhoods.
Retail includes both small local stores to massive shopping centers. Retail space tends to be more expensive than office space since retail businesses are highly focused on foot traffic. Leases are ordinarily long-term, between five and ten years.
Most of the time, retail properties have at least one “anchor tenant,” or well-known brand that helps attract customers to the area. You can learn more about retail real estate at ICSC.com.
Industrial buildings tend to be warehouses and other manufacturing or distribution facilities. These buildings are usually occupied by just one party and are typically found outside of urban areas. Most of the time, these buildings are used for industrial purposes, meaning that they often have to follow unique zoning regulations.
Some properties don’t fall into these categories but are still considered commercial real estate. These include hospitals, hotels, and storage buildings. Other unique properties that still fall into the commercial real estate category include car washes, theme parks, bowling alleys, and more. All of them are for-profit and are therefore commercial.