Common commercial Property Types:
Commercial properties come in a wide variety of shapes & sizes, depending on your intended use, some may be more appropriate than others.
Multi-Family Apartment Buildings:
Generally speaking, buildings composed of 5 or more units fall into the Multi-Family Apartment Building asset class. Apartment buildings are a gateway investment because they are easy to understand for investors and bankers and represent a logical progression from smaller 2-4 unit properties and there are usually reliable and predictable demand-generators, which ensure a steady supply of tenants for available units.
Mixed-Use Properties generally include a commercial component at ground level with a residential component above. An office above a retail use is also fairly common. Buildings in this class can have as few as two (2) total units. Mixed-Use properties are also easy to understand and operate and if properly located, can be extremely profitable investments.
Single Tenant, NNN Properties:
Imagine the Walgreens or CVS down the street. Properties in this category are generally free-standing and have only one tenant. For landlords, this type of property is attractive as an investment because the tenants are generally responsible for paying all building operating expenses, including property taxes, insurance and the maintenance of the roof and structure. NNN investments are about as close as an investor can come to a true ‘armchair real estate investment.’ Although NNN investments provide extreme ease of operation, they are usually quite expensive to enter and are typically left to more advanced private or institutional investors.
As the name implies, a building whose main function is to house professional offices. Properties of this type can be one story and exist in a non-descript suburban office park or be multi-story trophies sited in the city’s central business district. Commercial condos can fall into this category. Office properties are an advanced form of commercial real estate investment given their susceptibility to economic fluctuations.
Usually located in B or C zoning classifications. Any building whose primary purpose is to house businesses that operate retail establishments such as general stores, restaurants, bars or boutiques falls into this category. Buildings in this class can range from a single story building with one retail space, to a 30 unit strip center up to a 20+ acre big-box anchored, regional center. Commercial condos can, in some cases, fall into this category. Small to mid-sized retail properties are favored by hands-on, intermediate investors for their strong cash flow potential, relative ease of financing and wealth-building potential. A diligent operator with a well-located strip center (shopping plaza) and a proper tenant mix can succeed handsomely. The larger neighborhood, regional or super centers are typically left for the advanced or institutional investors.
Manufacturing facilities, warehouses and intermodal properties fall into this class. They can be small urban loft-style properties housing small clothing manufacturing operations or multi-million-square foot data centers. If people are making, storing, transshipping or storing things, it is probably an industrial building. Commercial condos can fall into this category.
Vacant Land Sites:
Usually rural farmland ready for subdivision and/or development or urban in-fill sites. Basically dirt.