Investing in commercial real estate can be highly lucrative, but understanding the different property types is essential before diving in. There are five main categories of commercial real estate, each offering unique opportunities and challenges. Whether you’re a seasoned investor or just starting, knowing these types will help you make smarter decisions for your portfolio.
The 5 Types of Commercial Real Estate Property
Multifamily Properties
Multifamily real estate offers multiple housing units under one property, making it ideal for investors looking to cater to tenants. It’s often seen as a great entry point into commercial real estate, particularly for those with experience in residential real estate.
- Types of Multifamily Properties:
- Duplex/Triplex/Quadplex: Smaller, multi-unit buildings with 2–4 units.
- Garden Apartments: Low-rise apartment complexes with multiple buildings.
- Mid-Rise Apartments: 5–9 stories, often located in urban areas.
- High-Rise Apartments: 10+ stories, typically found in major cities.
- Student Housing: Properties designed for college students.
- Senior/Assisted Living: Housing designed for elderly residents needing assistance.
Office Buildings
Office buildings cater to businesses and professionals who need workspaces. These properties are often classified by their condition and amenities as Class A, B, or C buildings. Offices range from medical centers to corporate headquarters.
- Types of Office Properties:
- Central Business District (CBD) Offices: High-rise buildings in the city center.
- Suburban Office Buildings: Smaller, low-rise offices outside the city.
- Medical Office Buildings: Properties for healthcare providers.
- Commercially Zoned Homes: Residential-style homes repurposed for office use.
Industrial Properties
Industrial real estate supports businesses in manufacturing, warehousing, and distribution. While not flashy, industrial properties are often stable, long-term investments that generate consistent returns.
- Types of Industrial Properties:
- Bulk Warehouse: Large warehouses for storage and distribution.
- Flex Warehouse: Properties that offer both office and industrial space.
- Heavy Manufacturing: Facilities for production and assembly.
- Light Assembly: Spaces for assembling smaller products.
- Refrigeration/Cold Storage: Temperature-controlled warehouses.
- Showroom: Industrial properties with attached retail space.
- Indoor/Outdoor Storage: Facilities for storing goods or vehicles.
Retail Properties
Retail properties cater to consumer-facing businesses and serve as essential components in shopping and leisure activities. From local markets to luxury malls, retail spaces are diverse and can offer stable returns when well-located.
- Types of Retail Properties:
- Community Retail Center: Neighborhood shopping centers with multiple tenants.
- Outparcel/Single-Tenant Net Lease: Stand-alone retail buildings, typically leased to one tenant.
- Power Center: Large, open-air shopping centers with major retail anchors.
- Regional Mall: Enclosed malls with a wide range of retailers.
- Strip/Neighborhood Shopping Center: Smaller centers with local retailers.
Hospitality Properties
Hospitality real estate includes properties like hotels and resorts that serve both business and leisure travelers. The performance of hospitality properties is closely tied to tourism and broader economic trends, offering high-risk, high-reward potential.
- Types of Hospitality Properties:
- Budget Hotels: Affordable accommodations for travelers.
- Extended Stay Hotels: Hotels designed for long-term stays.
- Full-Service Hotels: Offer a wide range of services, including dining and events.
- Limited-Service Hotels: Provide basic accommodations without extensive amenities.
- Short-Term Rentals: Vacation homes and rentals for travelers.
Multifamily Properties
Multifamily real estate offers multiple housing units under one property, making it ideal for investors looking to cater to tenants. It’s often seen as a great entry point into commercial real estate, particularly for those with experience in residential real estate.
- Types of Multifamily Properties:
- Duplex/Triplex/Quadplex: Smaller, multi-unit buildings with 2–4 units.
- Garden Apartments: Low-rise apartment complexes with multiple buildings.
- Mid-Rise Apartments: 5–9 stories, often located in urban areas.
- High-Rise Apartments: 10+ stories, typically found in major cities.
- Student Housing: Properties designed for college students.
- Senior/Assisted Living: Housing designed for elderly residents needing assistance.
Office Buildings
Office buildings cater to businesses and professionals who need workspaces. These properties are often classified by their condition and amenities as Class A, B, or C buildings. Offices range from medical centers to corporate headquarters.
- Types of Office Properties:
- Central Business District (CBD) Offices: High-rise buildings in the city center.
- Suburban Office Buildings: Smaller, low-rise offices outside the city.
- Medical Office Buildings: Properties for healthcare providers.
- Commercially Zoned Homes: Residential-style homes repurposed for office use.
Industrial Properties
Industrial real estate supports businesses in manufacturing, warehousing, and distribution. While not flashy, industrial properties are often stable, long-term investments that generate consistent returns.
- Types of Industrial Properties:
- Bulk Warehouse: Large warehouses for storage and distribution.
- Flex Warehouse: Properties that offer both office and industrial space.
- Heavy Manufacturing: Facilities for production and assembly.
- Light Assembly: Spaces for assembling smaller products.
- Refrigeration/Cold Storage: Temperature-controlled warehouses.
- Showroom: Industrial properties with attached retail space.
- Indoor/Outdoor Storage: Facilities for storing goods or vehicles.
Retail Properties
Retail properties cater to consumer-facing businesses and serve as essential components in shopping and leisure activities. From local markets to luxury malls, retail spaces are diverse and can offer stable returns when well-located.
- Types of Retail Properties:
- Community Retail Center: Neighborhood shopping centers with multiple tenants.
- Outparcel/Single-Tenant Net Lease: Stand-alone retail buildings, typically leased to one tenant.
- Power Center: Large, open-air shopping centers with major retail anchors.
- Regional Mall: Enclosed malls with a wide range of retailers.
- Strip/Neighborhood Shopping Center: Smaller centers with local retailers.
Hospitality Properties
Hospitality real estate includes properties like hotels and resorts that serve both business and leisure travelers. The performance of hospitality properties is closely tied to tourism and broader economic trends, offering high-risk, high-reward potential.
- Types of Hospitality Properties:
- Budget Hotels: Affordable accommodations for travelers.
- Extended Stay Hotels: Hotels designed for long-term stays.
- Full-Service Hotels: Offer a wide range of services, including dining and events.
- Limited-Service Hotels: Provide basic accommodations without extensive amenities.
- Short-Term Rentals: Vacation homes and rentals for travelers.
