31 October 2023

What is Commercial Real Estate?

Commercial real estate is defined as property meant for a business to create income, as opposed to residential real estate, which can only be utilized as a primary residence or for rental housing. Income from commercial real estate might come from the owner operating a business on the property themselves or by charging rent to organizations or people who lease the space. In this blog post, let's learn what commercial real estate is in detail.

So what is commercial real estate to be exact? Commercial real estate (CRE) is land and/or property utilized solely for business-related activities or to house offices rather than residences, which would fall under the residential real estate category. Most frequently, renters are leased commercial real estate to conduct businesses that generate cash. This vast real estate category can range from a small shopping mall to a single storefront. There are several types of commercial real estate. It could be anything, such as an office complex, a duplex, a restaurant, a coffee shop, or a warehouse. Commercial real estate can provide income for people, businesses, and corporate interests by renting or keeping it and reselling it. Office space, hotels, resorts, strip malls, restaurants, and healthcare facilities are just a few types of commercial real estate.

What Are the Different Types of Commercial Real Estate?

1. Offices

Now that we've established the commercial real estate meaning, let's dive into the different types of CRE that are most commonly used and utilized. Of course, when CRE is at stake, the first type of property that comes to mind is an office. Urban and suburban office buildings can often be divided into two categories. Skyscrapers and other high-rise structures used as urban office buildings can be found in cities; some of them have a size of up to a few million square meters. Office buildings in the suburbs are frequently smaller and arranged in office parks. Office buildings can have multiple tenants or just one, many of which are custom-built.

2. Retail

The term "retail" refers to the commercial spaces that house the stores and eateries we frequently visit. They may be multi-tenant (typically with a lead or anchor tenant that helps draw traffic to the leased property) or independent, single-use structures. The retail industry is complex because numerous factors, such as size, idea, types, and numbers of tenants, as well as trade area, determine the type of shopping center.

3. Industrial CRE

Most industrial buildings are found outside of metropolitan areas, particularly along important transportation corridors, where they facilitate industrial operations for various tenants. Industrial parks can also be created out of the low-rise structures.

4. Multifamily CRE

Commercial real estate is any property that is owned by a single business and contains five or more residential units. All residential real estate types besides single-family homes are included in the multifamily sector, including apartments, condos, co-ops, and townhomes. Multifamily real estate is frequently divided into Class A, Class B, and Class C.

5. Hotels

The hotel industry includes businesses that offer lodging, meals, and other services to tourists and travelers. Hotels can be independently owned (boutique) or branded, which signifies they are part of a well-known hotel chain such as Marriott, Hilton, or Sheraton.

6. Special Purpose

Commercial real estate investors may hold special purpose real estate, which does not belong to any of the aforementioned industries. Examples of special-purpose facilities include open spaces used for fairs, amusement parks, churches, self-storage facilities, bowling alleys, and so on.

How to Get into Commercial Real Estate?

Directly: Owning and operating a property yourself qualifies as a direct or active commercial real estate investing. Working with a real estate agent or lawyer to conduct market research, choose a property, and make an offer are two ways you can directly invest in real estate. To finance your acquisition, you'll likely need to have sizeable assets or engage with a lender who specializes in commercial real estate loans. To obtain money from a large number of investors, you can also design a syndication around a particular commercial investment opportunity.

Indirectly: You can also invest in real estate indirectly by purchasing stock in a business or partnership that focuses on commercial real estate property management, if managing a building or structure is too much effort or danger for your preferences. Passive real estate investors are those who take part in this manner. Despite not having any decision-making authority, they participate in the income and profits that the real estate produces. Our sales teams here at Nest Invest are ready to help you with all of your commercial real estate expectations and demands.