The term commercial real estate is fairly general and refers to a host of commercial property types from traditional office buildings and office condos, to land slated for development, farmland, warehouse space and even a bowling alley. At its most basic, commercial real estate describes any type of real estate that is used for the purpose of making a profit for the building owner.
Investing in commercial real estate is a great opportunity to build wealth that is often viewed as more stable than investing in stocks and bonds because of its intrinsic value. Further still, business owners who plan to purchase property and use it as owner occupied, are making a sound investment for their business at present and in the future when they plan an exit from their company. No matter the revenue generating purpose of the real estate, there are six commercial property types investors should be aware of.
Typically, when we think of commercial real estate a large office building comes to mind. There are two types of office property, urban and suburban. The large office building is the urban type and can be found in downtown and major metro areas. A suburban office will be smaller scale and may be found in an office park surrounded by similar small scale office properties in a suburban location.
If you’ve ever made a purchase at a coffee shop or clothing boutique or eaten at a local restaurant, then you’ve visited retail space, one of the 6 commercial property types. There are quite a few types of retail properties and the first we’ll explain is multi-tenant retail. One common type of multi-tenant retail is a shopping center with an anchor store, like a large scale King Soopers grocery store. The anchor store is used to drive traffic to the smaller, surrounding retailers at the location, hence the name.
A single-tenant retail property can take the form of a big box store like a location of a Target, or a smaller retail entity like a Starbucks or even a local banking location. A single-tenant retailer may also be referred to as a pad site which will be found inside a larger shopping development like an outdoor mall.
Industrial buildings include four types of real estate, heavy manufacturing, light assembly, bulk warehouse, and flex industrial. Typically, industrial real estate is found near major highways for ease of transportation and outside of well populated areas because of the type of trucking traffic they create.
The commercial real estate covered under the hotel sector categorizes any property that serves travelers and tourists with housing accomodations, meals and other related services. The hotel category again covers quite a few property types including:
The multifamily sector runs the gamut from an entire apartment building to condos and row homes – basically any type of rental residential property that is not a single family home. For financial and lending purposes, the Federal Home Loan Mortgage Corporation, also known as Freddie Mac, categorizes multifamily properties into six categories.
First, there is the high-rise property which has nine or more floors and an elevator. Second, comes the mid-rise property that is multiple stories (but less than 9), with an elevator and located in an urban setting. Third, there is garden-style, which will have one to three floors in an urban, suburban or even rural setting that might have an elevator and is built in a planned landscape setting.
Fourth, is the walk-up building which is a four to six story building with no elevator typical of downtown New York. Fifth, there is a manufactured housing community where property sites are leased to mobile homeowners. And finally, there is special purpose housing which includes segments like student and senior housing, as well as low income housing. This type can be any type of residential property.
Special purpose real estate does not fit the categories above and has a very specific use case scenario such as a bowling alley, a church, storage units, amusement parks, medical offices, hospitals, a firehouse, a railway station, a nursing home, dental offices, a sports arena, performing arts theater and many other exceptions.
To learn more about commercial real estate investment opportunities available in Colorado, we invite you to view our current property listings or speak with an expert commercial broker.
Rachael Holstein is the Marketing Manager for Transworld Commercial Real Estate, a full service commercial real estate firm in Denver, Colorado. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle! Visit transworldcre.com for more information.