All About Commercial Real Estate
Real estate property is divided into two main categories: residential and commercial. As the name suggests, commercial real estate is a type of investment property meant for commercial purposes.
Commercial real estate can be further divided into categories and subtypes. So, to make things less confusing, we’ve put together a crash course on what you need to know about commercial real estate, from what it is to the different types.
Table of Contents
- What Is Commercial Real Estate (CRE)?
- Who Owns Commercial Real Estate?
- Different Types of CRE
- Office Buildings
- Retail Spaces
- Industrial Properties
- Multifamily Housing
- Special Use Properties
- Investment Returns on CRE
- Commercial Leases
- Venture Into Commercial Real Estate With Rise Partners Today
What Is Commercial Real Estate (CRE)?
What does commercial real estate mean? Commercial real estate (CRE) is defined by law as property meant for a business to create income, in contrast to residential real estate, which can only be used for living.
How do these properties generate money? Rent payments from companies or individuals who rent space are one source of income from commercial real estate. Another is the owner’s own operation on the premises.
Who Owns Commercial Real Estate?
Commercial real estate can be owned by private individuals, business owners, financial institutions, and government entities. You can invest directly or indirectly in commercial real estate, either through a real estate investment trust or by purchasing shares in a publicly traded company.
Different Types of CRE
Commercial real estate properties are generally categorized by their purpose, the type of tenant who would occupy them, and the area where they are located.
Office Buildings
Office buildings range from corporate headquarters to small office suites for startups or freelancers. In fact, office spaces are further divided into three classes: Class A, B and C.
- Class A buildings are newly constructed and updated with modern amenities in prime locations.
- Class B buildings have some updated amenities, but may need renovations or repairs.
- Class C buildings are older with outdated features and are cheaper to rent.
Retail Spaces
Retail is the selling of goods and services in a physical location. In other words, these spaces are leased out to businesses that need a storefront location, like clothing stores or restaurants.
Industrial Properties
Industrial properties include warehouses, factories, distribution centers, refineries, etc. These properties tend to be large, have heavy machinery, and can be used for a variety of purposes. This is actually one of the most regulated and specialized types of commercial real estate.
Multifamily Housing
Multifamily housing is a residential property that has more than one unit within it; think apartment complexes or condo buildings with multiple rental units inside. While people live in these units, the property is still considered commercial because it’s owned by a business and rented out for profit.
Special Use Properties
Special-use properties are rare and tend to be customized for the specific needs of a tenant. For example, movie studios or medical facilities may have very particular requirements that can’t easily be found in a traditional building.
Investment Returns on CRE
The return on investment (ROI) from commercial real estate is usually higher than other types of investments, but it also comes with more risks. The amount you can make from an individual property depends on factors like location, rental rates, and occupancy levels.
It’s not always easy to predict what kind of return you’ll get from your investment; however, if you do your research and plan ahead, you could see some impressive returns in the long run.
Commercial Leases
Though some companies own the buildings they operate, leasing commercial real estate is more common. The building is usually owned by an investor or a group of investors, who receive rent from each business that works there.
Commercial leases can be complicated, so it’s important to read the entire contract carefully and understand all of its terms before signing. You’ll want to make sure you’re getting a fair deal that works for both parties.
Venture Into Commercial Real Estate With Rise Partners Today
Consider collaborating with Rise Partners if you want to benefit from the long-term potential that comes with investing in commercial real estate. We are well-versed in navigating the challenging world of CRE investments and are aware of what it takes to succeed. Don’t put it off any longer—contact us today to get started!