Commercial Property

There is no secret about commercial property, but like anything else, one must be educated in the different types of commercial property and have a working knowledge of the difference between them. Commercial property which is also referred to as investment properties or income properties refers to any building or land that are intended to generate income either through rental income of capital gains and are solely used for business purposes. Business’s or tenants that occupy these commercial property types lease the space from the property owner depending on their individual needs and business’s.

Commercial property cover a large segment of all commercial real estate transaction that occur over the course of any given year in the united state, and in 2011 accounted for over $160 billion dollars in gross annual sales.

There are several types of commercial property investments that one must become familiar with prior to investing or working in the commercial real estate industry. Predominately there are four major types of commercial property which are shown below.

  • Retail
  • Office
  • Industrial
  • Multi-Family

Out of the four major segments of commercial property types these can further be broken down into sub-types of commercial real estate as seen below.

CATEGORY SUB-CATEGORY
RETAIL Retail Stores, Malls, Shopping Centers, Shops
OFFICE Office Buildings, Service Offices
INDUSTRIAL Industrial Property, Office/Warehouses, Garages, Distribution Centers
MULTI-FAMILY (APARTMENTS) Multi-Family Housing Buildings – 5 Units or More

*Please keep in mind, depending on the state in which the commercial real estate sits, multi-family properties commonly known as apartments typically range from 5 units and above, otherwise the property is considered a residential property.

RETAIL PROPERTY (Retail Stores, Shopping Centers & Malls, Retail Shops)

Retail properties can be described commercial property establishments that is planned, owned and managed, and operated as a single property. The retails properties size are generally determined by the market and community needs within the city it is situated. The two main types of retail properties are shopping centers and open-air strip centers, and can further be broken down into additional sub-categories as illustrated below.

  • Strip Center
  • Neighborhood Center
  • Community center
  • Regional Center
  • Power Center
  • Outlet Center

These properties described above are used for businesses and the selling of goods and services. Retail properties can range from a couple thousand feet in leasable space well past millions of square feet.

This segment of commercial real estate has been crippled over the course of the last few years due to the slowing of the economy and the housing market collapse of 2007, and is not projected to recover for a few years to come, which has affected the Office real estate as well.

OFFICE PROPERTY (Office Buildings, Serviced Offices)

Office commercial real estate is often used to maintain or to occupy professional or business offices that typically lease whole entire buildings, floors, parts of floors. Office space can be used for a variety of purposes and is sometimes referred to as generic office space because floor plans can easily be modified or built out to suit that of the tenant and their personal needs for the type of business they’ll be conducting. There are several types of office commercial property and are typically broken down into size and architectural design. Most of us are familiar with the high-rise that we all seen on post cards of New York City, but there are several other types of office properties and the characteristic that make them up. (See Below)

  • Low-rise – Fewer than seven stories high above ground level.
  • Mid-rise – Between seven and twenty-five stories above ground level
  • High-rise – Higher than twenty-five stories above ground level. 

Along with retail properties, Office buildings have to been hurt by the drop in the united states economy, and investors have seen large vacancies affecting their properties with business’s closing down, or moving out of state which ultimately has affected the revenue these properties use to generate.

Unlike both Office and Retail real estate, Industrial properties have been making a slow rebound.

INDUSTRIAL PROPERTY (Warehouse, Manufacturing, R&D, Showroom, Flex Space)

Industrial properties can cover several different types of buildings, each with different characteristics constructed to support different business operations.  As mentioned above, it’s always good to having a working knowledge of the different property types, and their uses .

Industrial real estate are properties that are used for the purposes of production, manufacturing, or distribution, and or storage. These properties are usually built in unincorporated areas and tend to have tenants conducting business that don’t tend to rely on retail traffic.

Below are a few examples of the different industrial property types.

  • Warehouse
  • Manufacturing
  • R&D
  • Showroom
  • Flew-Space

Industrial properties saw a major down turn during the economic slide of 2007 but have seen a slow rise in the volume over the last few quarters.

MULTI-FAMILY PROPERTY (Garden Style, Walk Up, Bungalow, Mid/High Rose)

Multi-Family properties commonly known as apartments typically consist of at least five units or more, depending on the state in which the properties sits, otherwise its considered residential property.

Apartment buildings have several different architectural styles. The several different styles of building, each with their own appeal

  • Garden Style
  • Walk Up
  • Bungalow
  • Mid/High Rise

A garden style apartment is typically a property with a center courtyard , with landscaped grounds surrounding them between 2  to 5 stories and usually found in warmer climates, where as a walk up’s and mid/high rise properties are between 5-50 stories and have very little to no outdoor space but may offer many more amenities for the tenants.

Apartment buildings typically offer several different bedroom/bathroom options for perspective tents to choose from depending on needs, and financial constraints. The multi-family housing category includes many configurations as seen below, and is typically referred to within the industry as an apartments unit mix.

  • Bachelors/Efficiencies
  • One-Bedroom
  • Two-Bedroom
  • Three-Bedroom

Unlike the other three commercial property types, Multi-Family properties have weathered the storm of the economic strife and have seen a surge in investment popularity over the course of the last 24 months, and have drawn investors whom historically have invested in other properties types.

As investors continue to look for ways to maximize their investment dollars and the economy continues to rebound, we should see a greater rebound in the four major commercial property types. Having a working knowledge of the properties will benefit anyone that plans on having a career in an every changing industry.