The Five Main Types of Commercial Real Estate

Commercial real estate (CRE) refers to property used for purposes of business. If you are investing in commercial real estate, it is good to know what options you have before choosing. Here are the main types of commercial real estate you can invest in.

Multifamily Property 

This is a residential property containing more than one unit. An investor dealing with residential properties and wants to diversify their portfolio to CRE can have an easy time as they are familiar with the client base. When one has many tenants in a single property, they can enjoy multiple streams of income. Even when one tenant moves out, the income difference will not be that big. Examples of multifamily properties include Quadplex/ Triplex / Duplex, Garden Apartments, High-Rise, and Mid-Rise Apartments, Senior /Assisted Living, and Student Housing.

Office Real Estate

A major reason an investor may find office real estate appealing is due to multi-tenancy. Depending on the location and building style, one can have from one tenant to a few. In addition, office spaces are usually graded into classes A, B, and C depending on their quality and age. Investing in an office is more capital intensive compared to other CRE properties due to a high turning over cost. However, you will find that offices command high value. Office properties can be classified into Central Business District (CBD), Medical Office, Commercially Zoned Homes, and Suburban Office Buildings.

Industrial Real Estate 

This refers to properties intended for industrial use. They can be classified into the following;

  • Flex Warehouse- this space is flexible and accommodates multiple uses. You will find some industrial work being done in this office while on the other hand, there are office spaces for management. Flex warehouses are common with start-ups, mechanics, and research labs.
  • Bulk Warehouse- these spaces are extensive, ranging from 50,000-1,000,000 square feet. 5% to 10% of these spaces can be converted into offices, while the rest are left for others uses as warehouse space. This type of property is commonly used by people in distribution and logistics.
  • Heavy Manufacturing-you will find them in isolated areas due to the use of chemicals, heavy machinery, and power requirements.

Retail Real Estate

They are intended for businesses that offer goods and services to customers directly. They are also located in convenient areas for easy customer accessibility. Retail real estate includes Community Retail Centers, Power Centers, Regional Malls, and Outparcel / Single-Tenant Net. Commercial Property Denver has observed that retail has shifted due to the rise in delivery services. This is because people renting these properties want to offer customers convenient experiences.

Hospitality 

These properties are designed to serve travelers for business and pleasure purposes. Some also have entertainment facilities like waterparks. The type of property you will find in hospitality real estate include Budget Hotels, Full-Service Hotels, Extended-Stay Hotels, Limited-Service Hotels, and Short-Term Rentals.

Commercial real estate can lead to higher yields, especially if you are charging an increased rent. However, ensure the rent is reasonable enough to attract tenants. Also, you have a lot of options, as discussed above. You can assess the pros and cons and decide which risks you are ready to handle.

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