Commercial real estate (CRE) includes property intended for business purposes. For business owners, investing in CRE affords them space to operate their enterprises. For investors, CRE encompasses space they can lease to other businesses. Some of the major categories include:
Industrial CRE includes laboratories, warehouses, and manufacturing facilities. Some of these sites are larger than other commercial properties to allow for the construction of large-scale equipment and machinery. A disadvantage of industrial CRE is that they are usually intended for a single-use or house one tenant, making them less liquid compared to other CRE types. In exchange however, they typically come with longer lease periods to compensate.
Land is another category of CRE. One type is greenfield, or undeveloped land, such as unpaved pasture. Urban infill is vacant but developed land. Finally, brownfield land has already been developed but has been environmentally damaged and requires clean-up.
Apartment buildings that have four or more units are considered commercial rather than residential real estate. Apartment buildings include high-rises, expansive complexes, smaller multi-family units, and condominiums. Multi-family apartments tend to be less stable investments because they have shorter leases than office buildings. But while vacancy rates can change quicker then in some other CRE types, this can work to your benefit when raising rents as well.
Office properties include single-tenant buildings, skyscrapers, and large and small professional buildings. The office building’s value depends more on its location than its physical characteristics. Office real estate exists in major metropolitan areas, suburbs, and more rural areas.
Office space falls into one of three classes. Class A includes buildings deemed the most valuable because of their age, location, aesthetics, and architecture. Buildings in Class B are often designated for restoration because they are less costly and typically older. The oldest buildings usually belong to Class C. They’re generally in less attractive areas and require maintenance.
Restaurants and Retail
Restaurants and other retail spaces can be on the lower floor of a large office building, in strip malls, or stand-alone properties. Businesses include restaurants, fitness centers, dry cleaners, beauty salons and barber shops, and many other types of retailers and service providers. Investors often prefer neighborhood centers and strip malls because they contain many tenants.