Best Types Of Commercial Real Estate Property For Investors

Thursday Nov 14th, 2019


When it comes to commercial real estate property investment, it is much more complicated than residential investment, but on the bright side, CRE is an appealing investment due to its passive income, consistent returns, and growth potential. This sector of real estate investment is becoming more famous in the market today because of high returns.

Undoubtedly, commercial real estate property investment is very profitable; however, not all commercial investments are equally beneficial. If you want to make an investment in commercial real estate, it is vital to know the best commercial real estate to invest in to achieve maximum profit. Here are the best commercial investment type for investors.

  • Office
  • Retail
  • Multifamily
  • Industrial
  • Special Purpose

01 – Office

Office space is the most beneficial and best commercial property investment as from single-tenant offices to skyscrapers, these buildings are present with a wide range in the market. Office properties are divided into three categories – Class A, Class B, and Class C.

Class A properties are extensively renovated buildings or newly built. These office properties are located in prime areas and have access to all essential facilities. These are typically managed by real estate management businesses.
Class B real estate properties are those buildings that require some type of capital investment. These properties are well-managed and maintained, but need minor upgrades and repairs. These properties are the main target for investors.
Class C properties are usually used for redevelopment purposes. These are poorly located and have outdated infrastructure. Considerable capital investment is required for the refurbishment of such properties. Also, their vacancy rates are much higher than in higher-classes buildings.

02 – Retail

Another profitable commercial property investment is retail buildings. These properties range from community retail centers to strip malls and restaurants to banks. Retail properties are typically located in urban areas. The size of such properties varies from 5,000 square feet to 350,000 square feet.

03 – Industrial

From large manufacturing sites to warehouses, these buildings are typically geared towards manufacturing industries because they have more spaces with docking availability and height specifications. Moreover, these commercial properties generally lend themselves more to investment opportunities.

04 – Multifamily

This type of commercial property includes high-rise condominium units, apartment complexes, and smaller multifamily units. A property that has more than one unit is qualified as multifamily real estate. It is also considered as a commercial property if it has over four units. Many residential investors get their start in commercial properties by expanding into more significant multifamily properties. Residential tenants tend to have shorter lease terms than office and retail tenants, so tenant turnover is a factor that should be considered.

05 – Special Purpose

These types of commercial real estate properties are built for particular purposes; therefore, it is difficult to repurpose the property for another use. Self-storage facilities, car washes, and schools are all examples of such properties. Besides, the tourism and ledger industries represent a large proportion of special purpose real estate. Some of the common examples include airports, hotels, amusement parks, and sports stadiums.

Not only that, but mixed-use development properties are also profitable in the commercial real estate sector, and continue to grow in demand. These properties are comprised of multiple uses like retail, residential, and public sector. For instance, a mixed-use building could have shopping and services on the first floor while having apartments on the second floor. These multi-purpose properties have become popular in the last few years due to massive profit generation.

These are the best commercial investment types as of 2020, which will be very profitable for investors. If you want to invest but don’t know where to begin – here is a slight idea to help you get started:

  • Understand how commercial real estate works
  • Analyze comparables
  • Use the right success metric
  • Mistakes to avoid – financial ignorance, improper valuations, not working with a team, neglecting due diligence

Benefits of Commercial Real Estate Investment

Some people go for investing in commercial real estate property to have a secured and wealthy future, while others utilize it for tax benefits and investment portfolio diversification.

A commercial property investor can also take advantage of the following benefits:

  • Consistent cash flow
  • Higher-income
  • Longer leases
  • Less competition

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