What Is Commercial Real Estate?
Commercial real estate is defined as any real property that is used for commercial purposes or is commercial in nature. Their ultimate use is for business. It can be considered any real estate that is not a residential home for personal use.
What Are The Commercial Property Types?
The conventional commercial property types include industrial, office, retail, multifamily, and hospitality. Each property type is determined by its use and the needs of its occupants.
Office: Towering office buildings are often the first images that come to mind when one thinks of commercial real estate - they are often the most iconic property type of the industry. As the name implies, these structures are designed to accommodate tenants whose workforce is primarily composed of office workers.
Examples of business sectors that make up tenants that demand office space include finance, insurance, banking, technology, law, accounting, architecture, engineering, sales, marketing and medical services. Access to a talented workforce are the key driver for demand of office space.
Industrial: Industrial properties represent a significant portion of commercial real estate. These type of properties include warehouses, factories and many other types of structures and land used as manufacturing, processing, and storage facilities.
Industrial buildings may often seem simple, but their size, ceiling height, and ability to accommodate trucks and equipment are the overriding concerns. Industrial tenants need to house their goods and materials, storage systems, manufacturing processes, and employees.
Logistical services, the supply chain, access to materials, telecommunications infrastructure and operating costs are important factors in evaluating the location of industrial properties.
Industrial tenants may need access to rail services or proximity to ports. Manufacturing facilities need access to inputs and raw materials. Distribution facilities will need to be located in the region of the market they serve. Data centers may demand talent and low cost energy with access to large capacity data networks.
Retail: Retail properties house businesses that must be within physical reach of the customers they serve. Department stores, grocery stores, fast food restaurants, auto parts stores and movie theatres are all examples of businesses that make up the tenants of retail properties.
Retail properties are located within a certain distance of a specific demographic that represents the retailer's market. Retail properties are valued for their access, visibility, and proximity to vehicular or pedestrian traffic.
Hospitality: Hotels and motels are the bread and butter of the hospitality property type. These properties are specifically designed to offer a level of service and length of stay that caters to a specific clientele.
Hospitality properties are designed for end users that require a short length of stay or interim lodging. Hospitality properties are located at their customer's destination or on the path of their customer's journey. Hotels and motels are considered commercial properties because their owners and operators are in the business of providing temporary lodging.
Multifamily: Multifamily properties are primarily apartment buildings but can include any type of multi unit residential complexes. Even though they are residential properties, they can be classified as commercial properties because apartment buildings are businesses that provide habitation and lodging for a fee.
As businesses, multifamily properties are owned or managed by a single business entity. Multifamily properties are generally a more intensive use of land than single family homes. Due to their intensive use and economics, multifamily properties can often be located in areas that are commercially zoned, or within proximity to commercially zoned areas with higher land values.
Mixed Use And Other: Commercial properties do not necessarily fall clearly into one of these categories. Some properties may combine different categories into a mixed use property. An example would be a commercial building that has retail stores on the bottom floor while upper floors are a mix of apartments and offices.
Some properties may fall outside these categories all together such as agricultural land or golf courses. The common denominator is the property is used as a business for a commercial purpose to serve a given market.
What Businesses Are Part Of The Commercial Real Estate Industry?
Commercial real estate can also be considered as the host of industries that respond to the real estate needs of businesses, institutions, communities and governments. Many different specialized businesses must come together to produce operate, manage and maintain the built environment.
Among the specialties that make up the commercial real estate industry are commercial mortgage lenders, real estate developers, appraisers, commercial property managers, and commercial real estate brokers. Each one of these specialties makes a specific contribution that results in the commercial space that is occupied by businesses, institutions, and government.
What Is The Importance Of Commercial Real Estate?
Commercial real estate refers to the industry and resulting structures that support and embody our communities and serve our economy.
The commercial real estate industry and structures exist to meet the needs businesses so they can serve the needs of their market.
Commercial real estate is important because our economy would not function without the built environment that serves as the foundation of our communities.