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.

Multifamily

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).

Office

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

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.

Retail

The most common retail property types are strip/shopping centers, community retail centers, power centers, and regional malls.

• Strip/shopping centers: These are smaller retail properties that may or may not contain an anchor tenant (a large business, generally a chain department store or supermarket, that draws shoppers to the area). Instead, these centers usually have a variety of smaller retail establishments, like restaurants, hair salons/barbers, etc.
• Community retail centers: Unlike strip/shopping centers, these larger shopping areas usually have several anchor outlets. It’s quite common to find a few restaurants sprinkled in the mix as well.
• Power centers: These are a slight step up from community retail centers, meaning that they usually have more than one anchor establishment or major retailers like Target, Best Buy, or Whole Foods.
• Regional malls: Indoor shopping centers, usually about 400,000 to 2,000,000 square feet, that house a medley of department stores and big-box retailers.

Hotels

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.

• Full service: Finer establishments located in central business and tourist areas that offer luxury-level amenities, like room service and on-site gyms/pool areas.
• Limited service: Unlike full service hotels, these don’t provide the same caliber of amenities and are usually smaller.
• Extended stay: The units in these hotels are similar to residential apartments in that they usually contain a kitchenette and larger rooms for people who plan on staying for weeks at a time.

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.

Special Purpose

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.