Commercial real estate pertains to property used solely for business purposes. In the United States alone, this industry is worth trillions of dollars. As a steady source of income, commercial real estate comes in many forms:
1. Office buildings
Common examples of these are the skyscrapers that serve as headquarters for investment, companies, law firms, advertising agencies, etc. In a suburban setting, the usual skyscraper is replaced by midrise structures that serve as office centers.
These include shops, grocery stores, restaurants, malls, and retail chains. This kind of commercial real estate makes most of its profits through selling. This takes up 36% of all commercial real estate operations.
Land for commercial use could be a greenfield or an undeveloped land that can be used as a farm or a pasture. It could also be a brownfield, or a parcel of land that was originally used for industrial purposes. Lastly, it could be an infill or developed land that has been vacated.
This kind of commercial real estate is used for factories involving operations with heavy manufacturing, light assembly, flex warehouse, and bulk warehouse.
5. Apartment buildings
A common misconception is that apartment buildings are residential real estate. These buildings fall under the commercial classification because building owners use their space to earn income.
Five-star hotels, hostels, and other structures used for the hospitality business fall under this category. However, property used for Airbnb and other peer-to-peer platforms are not considered part of this category.
In the US, commercial real estate comprises three per cent of the economic output. Its growth usually follows indicators and trends for residential real estate. However, a slowdown in residential real estate may not necessarily mean the same with the commercial side.
Alan Naul is the founder of The Javelin Group. Since its establishment in 2004, the firm has developed and sponsored investments in over $400 million worth of commercial real estate assets. Check out this blog for more resources on real estate.