Commercial real estate can be categorized into several different types, ranging from single-tenant stores to mixed-use buildings. Retail properties include stores and restaurants of all sizes, and may be freestanding or incorporated into larger mixed-use buildings. Most retail properties are in prime first-floor locations and are leased to companies like offices. Industrial real estate, on the other hand, consists of factories and manufacturing hubs. Industrial properties are often outside of cities, in rural areas, or in special economic zones.
Many organizations buy commercial real estate as part of their corporate real estate portfolios, while others prefer to rent it instead. While buying commercial real estate may be a smart choice for many organizations, most companies choose to lease their facilities. Although leasing is more costly in the long run, it allows for flexibility. Typically, deep-pocketed organizations are the only ones investing in commercial real estate. The most lucrative commercial properties are large, in dense urban areas, and have a high rental rate.
Residential real estate includes single-family homes and multi-family units, while commercial properties consist of five or more units. In the case of multi-family properties, tenants are typically families or individuals. In contrast, commercial tenants are businesses. Depending on the type of property, tenants can be anyone from businesses to restaurants and cafes. Ultimately, the most lucrative real estate investments will always be ones with the highest cash flow. So, before investing in residential property, make sure you research your options and know what you’re getting into.
Industrial real estate consists of industrial businesses. Examples of industrial properties include oil refineries, warehouses, and research and development buildings. Some examples of industrial real estate include pharmaceutical research and development facilities and Amazon distribution centers. The quality of these properties will vary depending on where you choose to invest in them. Typically, industrial real estate is not in the best locations, and the lease period will be around five years. In the long run, industrial properties are more expensive than office buildings.
Retail properties may be multi-unit buildings, single-tenant buildings, or brownfields. Brownfields are generally industrial or commercial properties that have suffered environmental damage from past use. Other types of commercial properties include vacant lots, agricultural real estate, and special-purpose properties, such as theaters, amusement parks, and parking lots. Commercial real estate brokers work closely with these commercial properties and will assist you in identifying the most advantageous investments.
Prices for commercial real estate are governed by supply and demand. In areas with excessive commercial real estate, prices will be lower and more businesses will be found in these locations. Conversely, in areas with low commercial real estate, prices will be higher. Regardless of which type of commercial real estate you decide to pursue, you’ll benefit from understanding the key differences between the two types of properties. Using your knowledge of these properties will help you determine the best career path.
Compared to residential properties, commercial properties generally have longer lease terms. Residential properties typically only last six to twelve months, while commercial properties can last up to 10 years. These longer lease terms mean lower turnover costs and vacancy rates. They also signal reliable cash flow. Commercial real estate is a great option for investors looking for a steady source of income, and can also be profitable for many years to come. While it has higher upfront costs, commercial real estate is a good investment.