Did you know there are 4 different types of commercial real estate? First, let’s set the definition for commercial real estate versus residential. Think of commercial real estate as the business side of the real estate industry.
Small business owners and CEO’s are typically the types of clients that Commercial Real Estate Agents and Brokers deal with. These people are generally looking for a way to fund their business, sell their small business or improve upon their brick and mortar.
Now that you know what commercial real estate actually is we can begin to discuss the 4 different types including, industrial, multifamily, office and retail. Each of these industries is versatile yielding benefits to both investors and sellers.
Let’s Start with Retail Real Estate
Retail real estate is exactly what it sounds like, the buildings associated with retail businesses like malls, department stores, and strip centers. Think about local malls in the area, each of these places are considered retail real estate because they’re shopping centers for the community.
With the right investment, property, area, and opportunity this area of commercial real estate investing can be extremely lucrative. Retail real estate and malls typically have something called an ‘Anchor Store’ which is the main attraction to the area (think name brand – something everyone knows)
*Here’s a bonus tip for retail real estate investing: acquiring property near a grocery store means more customers and traffic to the business. I mean think about it, after grocery shopping (or before) people are likely to head over to the mall/department store. Or at the very least your new retail real estate will get some additional attention*
I’m sure you’re probably thinking that the size of the retail building you’re thinking about acquiring could be a risk factor but let me tell you why it isn’t. Even if you have 5 (viable) tenants who own small stores that are profitable your retail real estate will more than pay for itself.
Industrial is Not Dead
Industrial Real Estate has a low capital requirement which is a favorite among many investors and sellers. Why is the capital requirement so low you ask? Warehouses do not require much upkeep at all. Consider those big industrial buildings housing forklifts and tons of products (they won’t require much interior upkeep because they only need the space to function within their industry)
This means most industrial real estate tenants aren’t needy. These are warehouses and distribution centers which is why it can be the most profitable type of commercial real estate.
Your mind should automatically go to well-known logistics centers, grocery store chains, and products that are in high demand when searching for industrial real estate success.
The only downside is on the occasion that you choose a tenant that isn’t profitable. Do your due diligence and make sure they are manufacturing something that is very high in demand (3-4 tenants can be risky if their business isn’t lucrative)
Multi-Family (Apartments) for The Win
Most people think of apartment complexes when the phrase commercial real estate pops in their mind. This is another super lucrative industry. I’d venture to say it is the most lucrative out of the 4 types of commercial real estate.
Here are a few benefits:
- Consistency (rent)
- Low Risk (everyone needs somewhere to reside)
- Quick Turn Over’s are Ok
- Little Work Investment
- Student Housing is Another Option Here
I think you get the point right? Apartment complexes are a no-brainer for those of you who are eager to leap into commercial real estate. When was the last time you saw an apartment complex with a 50% occupancy rate? (probably never)
Most apartment complexes are overflowing with applications and tenants which is why this industry is appealing for many investors.
Office Space is Awesome Too
Now, Office Space differs from the others because you generally need much more upfront capital for this to work. Of course, there’s always financing options to assist with this. One of my favorite aspects of office real estate is the fact that your tenant will pay for everything from maintenance to insurance, taxes, etc.
Given the right tenant with a profitable business, you can make office space commercial properties work for your benefit. Be careful when choosing tenants — make sure they’re a reputable, established business. Inflation on these properties also goes up rather quickly which means you’ll get an increased ROI pretty frequently and quickly!
Here are a few potential ideal office space clients you can target:
- Law firms
Now that you’ve got these 4 commercial real estate types down pact let me know down below which one seems most attractive to you.
For all questions, concerns or to get started with commercial real estate investing contact us so we can get your commercial real estate goals accomplished.
Keith McLaurin | Licensed Commercial Broker ID#01190109 / NMLS#1209195