Learn the 8 Commercial Real Estate Property Types
When you invest in commercial real estate, you are purchasing assets that can generate revenue. These properties are hard assets that do not provide high liquidity, but they are more predictable than other public market investments. Understanding the different types of investment opportunities can help you determine the best course of action for your endeavors.
Types of Commercial Properties
This kind of real estate can vary greatly, but there are eight primary categories:
- Retail: This real estate type contains properties that have spaces for retail operations. These can be single-tenant buildings or large complexes. Some examples include:
- Factory outlets
- Strip malls
- Shopping malls
- Standalone buildings
The property location is an essential consideration for this kind of purchase, as it will impact the amount of rent you can charge.
- Office: This refers to buildings that house office spaces. With this type of investment, your lease terms are typically longer, ranging from five to ten years. Properties can include high-rise buildings, skyscrapers, or smaller office parks in the suburbs. There are various sizes and styles.
- Industrial: These buildings encompass industrial operations for various tenants. The locations are usually outside of urban settings in areas zoned for their purpose. Building types incorporate:
- Product assembly facilities
- Heavy manufacturing operations
- Bulk warehouse properties
- Distribution centers
- Research and development companies
- Multifamily: This commercial real estate type involves buildings with more than four residential housing units that you can rent to tenants. These agreements usually have flexible lease durations. The size of the buildings varies and includes:
- Apartment buildings
- Hotel: This category encompasses independent, chain, or franchise hotel properties, such as:
- Full-service businesses
- Limited-service motels
- Extended-stay properties
- Resort facilities
- Boutique properties
- Mixed-Use: These real estate structures combine more than one type of property. The most common examples are retail or restaurant properties in cities with residential or office units for rent above or industrial buildings containing office space.
- Special Use: These commercial properties include real estate that does not fit into the above categories, such as:
- Parking lots
- Amusement parks
- Bowling alleys
- Land: This category is for undeveloped land that you can develop into a profitable venture. Types of commercial land opportunities include:
- Infill – This refers to developed land in urban locations that is now vacant.
- Agricultural – This involves land that you can use as pasture or a farm, such as ranches, orchards, animal farms, and more.
- Brownfield – These are land parcels that were previously industrial but are now available for other uses
Purchasing commercial real estate is an excellent way to create a profitable future. Having a general understanding of the various property types can help you get started.