7 Categories Of Commercial Real Estate That Make Up The Whole Industry

By on May 26, 2014

If you have made the decision go commercial rather than residential, you have taken only the first minor step in identifying what you should invest in. Because commercial real estate have many different classes and categories for investors to get involved in. Managing them is one big headache you will surely think about. You will however, surely end up in one of these 7 types.

Offices

This is the most visually dominating commercial real estate you will see. From mega buildings to the office-styled condominium, they are everywhere. Almost every organisation and every employee needs an office to go about their work. And these offices come in all forms of shapes and sizes. Because of such a huge demand for such properties, you will never be short of investment options unless you get emotional over one of them.

Unlike a home where you want the most convenient location for yourself, people can travel to far out inconvenient locations just for work. So location is not always a major factor to how commercial tenants choose their office spaces. So don’t let a weird location stop you as long as the numbers make sense.

Industrial properties

Many investors are still confused with industrial and commercial real estate. As a layman approach to differentiating between the 2, consider this tip. Commercial properties are those that people go to work in an office where normal operational activities does not cause any serious noise pollution or safety hazards. Business with operations that causes them are industrial. Meaning that when forklifts are needed to shift inventory in the warehouse, or metal welding that cause a lot of noise disturbance, or logistics companies that need heavy vehicles and machinery to conduct their daily operations, are industrial. Then there is light and heavy industry to come to terms with as well.

If you are still confused with the 2, your best action is to go to the authorities and ask about how they define industrial properties. You will probably get an answer regarding industrial operational activities as well. Warehouses and buildings with heavy vehicle access for loading and unloading will definitely be industrial.

new-york-city-commercial-real-estateRetail

Very few people will need to be coached on what is a retail property. They are dominant in malls and shopping belts. The advantage of getting one is that good locations are not often available. And when you do get one in a good spot, you will be flooded with bids from major retailers on taking up your space.

The main drawback of retail properties is that how an economy is performing can greatly affect consumer spending. And if your tenant is one that depends on human traffic rather than customer loyalty, things can go downhill very fast. So make it your goal to sign up branded retailers.

Multifamily buildings

If you go into the business of acquiring multifamily buildings that can house a huge number of households, you have entered the side of commercial real estate. Your tenants will be residents, but your clients could also be organisations who are responsible for the accommodation of their staff.

Your biggest challenge in filling up vacancies is competition. As most investors invest in residential rental property, you will often find yourself as only one of the choices a tenant is considering. And not only that, tenants have to make a decision of whether to buy or rent before even talking to you. Don’t forget to approach big companies at their manpower departments promoting what you have to offer.

Hospitality

These are the types of real estate that are somewhat hybrids of commercial and residential. They include hotels, resorts, hostels, and even casinos if you want. These investments are often ready to churn out cash for you with all systems in place. The key to attaining those will be to manage your asset as well as possible together with the marketing skill to reach the right market segment.

You will also realise that success in these types of commercial investments depends a lot on the tourism industry. And that depends on economic conditions. If people are doing well and earning a good income, this sector will boom. While the reverse effect is also true.

Medical care

This class of real estate include hospitals, nursing homes, facilities that provide special care, etc. Health care is a service that generates one of the highest margins around. They charge a high price for a service based on expertise and experience. The bottom line is that tenants are usually professionals who will have no problem paying a high rental as long as the returns justify it.

If you intend to operate your own facility, you need a huge budget to hire professionals. At the same time you are taking on the type of liability which you really have no business to be in. It is best to just get good tenants and rent out to them. Playing your role as a good landlord is all that is needed.

Storage facilities

Storage used to be a service required by companies needing to store equipment or inventory. But in recent years, individuals are using them by the masses, opening up a new market for self-storage facilities. It actually make a lot of sense. So much so that you wonder why it took so long for this to hit the mainstream.

Companies need warehouses to store all types of stuff. And believe it or not, there are businesses who would rent warehouses from you so that they can sub-lease them to others for storage. Those who are a little savvier will break up big warehouses into many smaller ones and rent them to different tenants for use.

Unlike retail properties, storage facilities are easy to invest in. So you could encounter fierce competition unless you are able to carve out a narrow niche for yourself. For example, you could focus on high security with cameras, guards, fences, etc. This will attract a particular type of business. Storing special material can also be something for you to consider. Some materials and products need special conditions for them to be stored properly.



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