Commercial Real Estate can vary from a multi-family property, such as a duplex, all the way to a large office tower or industrial site.
While the classifications can vary from agent to agent; generally, commercial real estate can be broken down into eight major categories.
Here are the 8 types of commercial real estate and a brief description of each:
Multi-family properties are the go-between for residential and commercial real estate.
While they can serve primarily as a residency, the general purpose for the property type is for investment (owner-occupied or not).
The multifamily asset class includes everything from a duplex to a multi-hundred-unit apartment building.
Like multifamily properties, office buildings are also designated to low, mid, and high rise based on their size.
Office buildings are usually loosely grouped into one of three categories: Class A, Class B, or Class C.
These classifications are all relative and largely depend on context—i.e., the location of the building and health of its surrounding market.
Class A buildings are considered the best of the best in terms of construction and location.
Class B properties might have high-quality construction but with a less desirable location.
Class C are those that might be fairly dilapidated and in an unfavorable location.
Industrial properties can also vary quite a bit in size, depending on their specific use cases.
Heavy Manufacturing industrial properties are a special-use category that most large manufacturers would fall under.
These types of properties are heavily customized with machinery for the end user, and usually require substantial renovation to re-purpose for another tenant.
Light Assembly properties are much simpler than heavy manufacturing properties and usually can be easily reconfigured.
Typical uses include storage, product assembly, and office space.
Flex warehouse space is an industrial property that can be easily converted and normally includes a mix of both industrial and office space.
Flex space can also be considered mixed-use, which we’ll discuss in more detail below.
Bulk warehouse properties are very large, normally in the range of 50,000-1,000,000 square feet.
Often these properties are used for regional distribution of products and require easy access by trucks entering and exiting highway systems.
Retail properties can broken down into a few categories, as follows:
Strip centers are smaller retail properties that may or may not contain anchor tenants.
An anchor tenant is simply a larger retail tenant which usually serves to draw customers into the property.
Examples of anchor tenants are Wal-Mart, Canadian Tire, or Home Depot.
Strip centers typical contain a mix of small retail stores like Chinese restaurants, dry cleaners, nail salons, and so on.
Community retail centers are normally in the range of 150,000-350,000 square feet.
Multiple anchors occupy community centers, such as grocery stores and drug stores. Additionally, it is common to find one or more restaurants located in a community retail center.
Power center generally have several smaller, inline retail stores, but is distinguished by the presence of a few major box retailers, such as Wal-Mart, Staples, Best Buy, etc.
Each big box retailer usually occupies between 30,000-200,000 square feet, and these retail centers typically contain several out parcels.
Regional Malls range from 400,000-2,000,000 square feet and generally have a handful of anchor tenants such as department stores or large retailers like Old Navy or Sports Chek.
Stand-Alone retailers which are parcels of land set aside for individual tenants such as fast-food restaurants or banks.
Hotels tend to fall under three different categories; full service, limited service and extended stay.
Full-service hotels are usually located in central business districts or tourist areas and include big-name flags like Marriott, Four Seasons, or Hilton.
Limited-service hotels are usually boutique properties. These hotels are smaller and don’t normally provide amenities such as room service, on-site restaurants, or convention space.
Extended-stay hotels offer larger rooms, often with kitchenettes, and are designed for people staying one week or more.
Mixed-Use properties, while their own distinction, can actually be a combination of any of the aforementioned types of commercial property.
The most common form of mixed-use properties, especially in cities, are retail/restaurant properties with offices or residences sitting atop.
Think of your general downtown high-rise building, and there’s a good chance that the asset is considered mixed-use.
Typically, mixed-use properties are some combination of office, residential/multifamily, retail, and/or industrial.
Agricultural land refers to undeveloped lands such as a farm or pasture.
Within this bucket would be different types of agricultural land as well, like orchards, animal farms, ranches, and more.
Infill land is located in a city that has already been developed but is now vacant. Infill is strictly associated with the development of real estate in urban locations.
Special purpose property is more or less the miscellaneous classification of CRE.
Examples of special-purpose properties include amusement parks, bowling alleys, parking lots, stadiums, theaters, zoos, and much, much more.