If you’re looking to invest in commercial real estate, you’ve entered into a complex, diverse and potentially lucrative industry. Commercial real estate properties have the potential to product a lot of income over their life span and can hold a lot of advantages over real estate in the residential sector. They can help to generate cash flow as well as be a long-term investment for building wealth.
That being said, there are still some inherent risks built into investing in real estate of any kind. The more you understand about the industry and the markets you’re looking to invest in, the better decisions you can make.
What Are The Different Types of Commercial Real Estate?
One of the first, and most important, questions to answer when it comes to commercial real estate are the different types available. While commercial properties, in general, are used to generate revenue for business purposes, the types of businesses and buildings differ by industry. Some of the most common types of commercial property include the following:
This is a very popular type of commercial property. Retail properties include things like shopping malls, strip malls, community retail centers, restaurants and much more. Typically, these types of commercial real estate are located in urban areas and need to be in places that get foot traffic in order to be successful.
While the main purpose of these buildings are for residential living, they are considered commercial properties. Typically, a multifamily property is made up of apartments, condos, etc. The minimum number of units is four, but they can go up to 100 or more.
Businesses in the manufacturing industry need big, large spaces to operate. Industrial properties like warehouses have certain specifications for height and docking. Usually, these types of properties are sought after by investors.
Office space is the most common type of commercial real estate out there. These buildings can house hundreds of employees, multiple businesses or even single tenants. Typically there are three classes of office buildings:
- Class A – Newly built properties that are in great areas close to lots of restaurants and amenities.
- Class B – Older properties that need some capital in order to get up to speed. Need some upgrades, but no many. Are great targets for investors
- Class C – These properties need a lot of work. They either are in a bad location or have infrastructure issues.