To put it simply, commercial real estate is any free-standing building with five or more units that has commercial (or profitable) influence. If you’re thinking about investing in something as substantial as commercial real estate, you may find the information below to be useful. It runs through the main types of commercial real estate properties with a description of each.
Even though they’re used as residences for tenants, multifamily properties are considered commercial real estate because they constitute a business for their owner. Some of the most common multifamily building types are duplexes (two-unit), triplexes (three-unit), and quadraplexes (four-unit), as well as garden apartments (one-, two-, or three-story apartments constructed in a garden or courtyard setting), mid-rise apartments (buildings with 5 to 12 stories that house approximately 30 to 110 units), and high-rise apartments (typically upwards of 10 to 12 stories with more than 100 units).
In the same vein as multi-family properties, office buildings are categorized into mid-rise and high-rise, but office buildings are different in that they’re used for business purposes. Office buildings are also categorized into three classes: A, B, and C. Class A buildings represent the gold standard in terms of location and construction, while class B buildings are of high-quality construction but are located in a less desirable location. Class C buildings are of the lowest quality – usually in poor condition and located in an undesirable area.
There are two other categories for which office buildings can be organized: central business districts (located in the heart of a city, with high rises included in the category) and suburban office buildings (generally smaller buildings that are located outside of a city center).
Industrial properties vary in size and structure, depending on their purpose. For instance, heavy manufacturing industrial properties are generally large since they need to accommodate sizeable machinery. Light assembly properties (which are generally used for storage, product assembly, and office space) are smaller and can be easily remodeled. Flex warehouses are more versatile properties that can be used for industrial or office space, while bulk warehouses are the largest – around 50,000 to 1,000,000 square feet – and used for the distribution of goods.
The most common retail property types are strip/shopping centers, community retail centers, power centers, and regional malls.
Hotels are commercial properties that are established with the purpose of lodging guests. There are three main types of hotel properties: full service, limited service, and extended stay.
These space-maximizing properties contain a blend of office space and residential units and are generally found in cities. The most common configuration has offices on the ground floor or lower floors with apartments above.
Buildings in this category are considered miscellaneous properties and are most often owned by larger investors or groups. Some examples are stadiums, theaters, amusement parks, and parking lots.