Commercial properties are defined as any property that is used for business activities; this includes office buildings, industrial property, medical centres, hotels, malls, retail stores, farm land, apartment buildings, warehouses, garages, and residential property containing more than 4 units. The flashiest real estate investors in the world (think Donald Trump) cash in on commercial properties – it’s truly a high-risk high reward game.
Commercial real estate is commonly divided into six categories:
- Office Buildings – This category includes single tenant properties, small professional office buildings, downtown skyscrapers, and everything in between.
- Industrial – This category ranges from smaller properties, often called “Flex” or “R&D” properties, to larger office service or office warehouse properties to the very large industrial properties.
- Retail/Restaurant – This category includes single tenant retail buildings, small neighbourhood shopping centres, larger shopping centres, and your favourite dining establishments.
- Multifamily – This category includes apartment complexes or high-rise apartment buildings. Generally, a fiveplex or more is considered commercial real estate.
- Land – This category includes undeveloped, raw, rural land in the path of future development. Or any plot of land that is vacant.
- Miscellaneous – This category would include any other non-residential properties such as hotel, hospitality, medical, and self storage developments.
- Longer leases than residential properties
- Considerable and stable monthly cash flow
- Multifamily and multi-tenant properties can reduce overall risk of vacancy loss
- Typically a lower administrative overhead than a similarly valued portfolio consisting of residential real estate.
- Requires greater real estate knowledge and experience to be successful. Compared to residential investing.
- Some commercial property types can have longer periods of vacancy in between tenants-multifamily would typically be excluded from this statement.
- Some commercial property types, such as office and retail, are more sensitive to economic downturns than residential properties.