4 Different Types of Commercial Real Estate

Commercial Real Estate in general is a large market with many participants in many sub-sectors. If you decide that commercial real estate is right for you, then you will definitely want to choose a niche to focus your attention.

Here are 4 Different Types of Commercial Real Estate

1.) Land/Land Development

A very wealthy investors once told me that land was a great investment because “they ain’t making any more of it”. He was right that land is a scarce commodity that will always be in demand. However, the prospects of raw land becoming a great investment will depend upon the investors ability to develop the land into something of value. There are many steps involved in developing land and your timetable for completing a project can vary greatly depending on a wide variety of circumstances. The potential for profit is huge, however, land development is not for the faint of heart. It is capital intensive and speculative in nature.

2.) Retail Shopping Centers

Retail shopping centers are a profitable sector for commercial real estate investors. The benefit of retail shopping centers is that you have the potential to acquire a wide variety of tenants and that your retail property can be the cornerstone for a community. One thing to consider when investing in retail shopping centers in location, location, location. Retail centers thrive in locations that are highly visible and accessibly to passing traffic.

3.) Office Buildings

Another sector of commercial real estate that can be responsible for large profits is the office market. One of the benefits of investing in office buildings is that office tenants generally sign longer leases, ranging from three years and higher. The benefit in this is that you have the potential to receive a steady stream of rental income for a longer period of time. The downside to this is that it normally takes longer to find office tenants than other types of commercial tenants, which means that your vacancies can last for long periods of time as well.

4.) Apartments/Multi-Family Housing

Investing in apartment buildings can be a great investment strategy, especially if you are looking to build passive income. Although, there always tends to be a demand for rental housing in some capacity, investing in multi-family housing can be management intensive. Unlike other forms of commercial real estate, residential tenants generally only commit to 1 year lease terms. This can cause more tenant turnover, thus it is important to have a management plan in place in order to constantly keep the units up to date and occupied with paying tenants.

These are a few of the different sectors of commercial real estate where can begin your investing journey. As always if you have questions, we can carry the conversation over into the comments section below.

Photo: Gera Developments

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.