According to The Real Estate Roundtable, the value of US commercial real estate (CRE) is between $18-22 trillion. Real estate has long been a high-value market, as it's high in demand and the availability of land only decreases.
Most people start with buying residential real estate, but as you can see, CRE can be a large untapped resource to take advantage of.
But, before you jump into it, what is commercial real estate? Read on to find out the answer to this question and more.
What Is Commercial Real Estate?
Commercial real estate is a term for properties that are used exclusively for busines purposes or to generate income. Some examples of CRE include:
- Office buildings
- Industrial properties
- Retail spaces
- Multifamily apartments
Even land that has the potential for development into commercial uses can be considered CRE. Basically, it can be any piece of property that's intended to produce a financial return (either through rental income, capital appreciation, or both).
Key Types of Commercial Real Estate
We've briefly mentioned the examples of CRE in the above section. Now, let's go into detail about commercial property types.
Office Buildings
These range from skyscrapers in major cities to smaller suburban office parks. They fall into Class A, B, or C, and the type is dependent on the building's location, condition, and amenities.
Industrial Properties
Factories, warehouses, and distribution centers fall into this category. This may be an interesting sector to focus on, as demand has surged due to the rise of e-commerce, which requires large logistics hubs.
Retail Spaces
Retail spaces include:
- Shopping malls
- Strip malls
- Standalone shops
- Restaurants
Often, retail tenants have leases with percentage rent agreements. This is where the rent is based on a percentage of sales.
Multifamily Apartments
Multifamily apartments are apartment buildings or condo complexes designed for residential leasing. They're typically categorized by unit size, location, and amenities. Most landlords utilize turkey property management services to have a more hands-off approach.
Key Insights Into the CRE Market
The primary draw to CRE is the ability to generate rental income. These investments tend to be more long-term compared to residential real estate, as lease terms typically last several years.
While CRE investments can provide stable income, do not note that the market is cyclical and heavily influenced by economic conditions. When there's economic growth, expect demand; during recessions, expect more vacancies and declining rents. Pay close attention to real estate trends to make wise moves.
Make a Smart Investment
Now you know the answer to the question, "What is commercial real estate?" It plays a vital role in the economy and can generate steady income for landlords.
However, smart investments require careful analysis of market conditions and tenant demand. Therefore, it's best to work with experienced professionals to ensure you're putting your money into the right things.
Contact us now if you're interested in making a real estate investment and need property management solutions. We at PMI Arrico Realty and Property Management bring almost 20 years of experience to the table and know the local area well.
