Real estate investing typically consists of commercial or residential properties. There are many key differences between the two types; Residential properties are mostly smaller and family-oriented while commercial properties can consist of anything from shopping centers to storage units. Other differences can include building materials, permits, codes, and required equipment. Many first-time investors might not be aware of how to distinguish between a commercial and residential property. This guide will explain several different types of commercial real estate and how to navigate them through real estate investing.
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Office Buildings
Office space can come in many sizes varying from a single tenant to large high-rise buildings. These buildings are in abundance in both urban and suburban neighborhoods. An upside to investing in office space is that tenants often sign long leases securing future ROI. On the other side of that, tenant turnover can cause office investing to be more capital intensive. Types of office spaces can include medical offices, commercially zoned homes, and central business district buildings. Office buildings are also separated into three tiers: Class A, Class B, and Class C.
- Class A office buildings are newer in age and at the top of competitors. Class A rent is above average considering these properties have a state-of-the-art, high-quality presence. Large, top-tier companies usually house these buildings.
- Class B office buildings rent about average and supply adequate space to their tenants. These are very common spaces and give off the standard “you get what you pay for” idea.
- Class C office buildings are of the lowest quality, renting below average, and often compete for tenants rather than the contrary.
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Industrial Property
Like office buildings, industrial properties heavily vary in size and purpose. They can simply be used to store things or be a place of work for businesses. These spaces are typically in low-rise buildings in more urban areas or industrial parks. The demand for these properties will vary by location, but they can certainly make a good investment. Types of industrial properties can include:
- Light Assembly
- Heavy Manufacturing
- Storage Units
- Research Facilities
- Cold Storage
- Bulk Warehouse
- Showrooms
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Multi-Family Housing
Although similar to residential property, multi-family housing becomes commercial property when it has more than one unit. Like office buildings, multi-family housing can be classed into the three categories stated above. These properties can be a great place to start for investors wanting to transition from residential real estate. With rental prices increasing and high demand for units, investment in these types of properties are becoming quite popular. Types of multi-family housing can include:
- High-Rise Apartments
- Mid-Rise Apartments
- Garden-Style Apartments
- Duplex, Triplex, or Quadplex
- Subsidized Housing
- Student Housing
- Senior/Assisted Living
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Hospitality
Although this category might seem less popular than others, there is a lot of investment potential in hospitality properties. These typically serve travelers as temporary, short-term residence. Hospitality offers accommodations, entertainment, and meals to its guests. Types of hospitality properties can include:
- Boutique Hotels
- Budget or Limited Service Hotels
- Short Term Rentals
- Full-Service Hotels
- Casinos
- Extended-Stay Hotels
- Resort
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Retail Space
Investing in retail space is similar to office and industrial properties. Location is essential with retail so that the businesses have steady traffic. These properties house restaurants and retailers and can come in many different concepts. Retail space can have multiple tenants or a single tenant in a standalone building. Types of retail space can include:
- Regional Mall
- Strip Shopping Center
- Community Retail Center
- Outparcel
- Power Center
To learn more information about investing in commercial real estate, check out Reasons to Invest in Multifamily Real Estate.
Read our related blog here:
The Ultimate Guide to Corporate Housing: Everything You Need to Know
Bella Doss
Bella Doss is a content marketer and social media enthusiast. She is passionate about content creation and experimental marketing. When she’s not busy in the creative process, Bella enjoys reading psychological thrillers and fantasy novels, going to the gym, and…Learn more about how we can help. Customized solutions for large portfolios!