Commercial real estate investing can be an incredibly lucrative option for those looking to expand their businesses or those looking for alternative investment strategies to build their portfolios.
However, there are several different types of commercial real estate options out there to choose from. Plus, you’ll need to consider things such as the need for having a deep foundation or other mandatory renovations based on the type of structure you intend to have.
Whether you’re starting from the ground up or are renovating an existing property, here are six types of commercial real estate.
When people think of multi-family homes, they usually think of duplexes. But multi-family can mean as many as a triplex, quadruplex, or any type of apartment building. These are a great first step for people wanting to learn about investing in commercial real estate.
It does, however, come with its own set of responsibilities, as you’re now becoming a landlord. Starting with any of the smaller multi-family properties, such as a duplex or triplex, is the best place for beginner investors to start.
Office buildings are very similar to multi-family properties. Instead of places to live, people will rent out the vacancies to businesses.
Commercial office buildings are typically put into one of three categories: Class A, B, or C. It’s vastly relative but based on various things such as development type and location.
As you progress through your commercial investment venture, you can start to branch out into more lucrative types. Buildings in central business districts are usually located in larger cities, which also means the income from the tenant’s rent will equate to more.
3. Industrial or Manufacturing
Larger spaces that are used for assembly lines, warehouses, or other manufacturing needs have their own specific set of requirements for landing on a commercial property. The sites need to be safe and conducive to potentially large pieces of equipment.
Many modern businesses have started utilizing warehouses, as they can sometimes be more affordable and can create an off-beat industrial aesthetic for their customers. But most often are used for larger companies with more substantial needs.
They aren’t quite as glamorous as other types of real estate investments but are necessary for the economy. You’re more likely to find tenants who sign longer lease terms for industrial commercial real estate, as it’s more difficult to move locations for someone within this type of business.
Retail properties come in a wide variety of sizes and locations. Most often, a business owner will rent out a small portion in a stripmall or within a commercial complex. However, there is a chance for very lucrative opportunities through major corporations.
Businesses such as Walmart, Target, or Best Buy, for instance, can easily look to rent commercial property in what’s called a power center. A box retailer as listed above can use upwards of 300,000 square feet depending on their needs.
Other companies, both big and small, can benefit greatly from renting space from a commercial real estate investor who owns property in a regional mall setting. This allows for a wider range of income opportunities, plus a huge benefit of tax breaks, given you’ll bring more jobs into the city.
Whether it’s a hotel, boutique, or bed and breakfast, these types of commercial real estate will need to be located in central business districts. People who need hotels typically are coming to a major city for a specific work function or on a personal vacation.
This is where location strongly comes into play. You won’t want to set up a hotel in a town that has limited visitors. This can make or break the success of your business.
6. Other Types
There are a few other types of commercial real estate that can be considered a great investment opportunity. Land can be leased for the use of agricultural means. Mixed-use is a great opportunity for both apartments, offices, retail, and even hospitality.
Then, of course, there is a miscellaneous category known as “special purpose.” These are all other types of commercial real estate that don’t quite fit a certain category such as zoos, stadiums, or parking lots.
The most important part of any commercial real estate investment is to first understand your main goal. From there, you can decipher which route of real estate you’ll want to begin researching.