If you guessed that each of these can be defined as commercial real estate, congrats — you have scored 100% on today’s quiz! If the answer didn’t quite spring to mind, this blog entry is for you — please continue reading.
There are just a couple of broad categories used in discussing and transacting real estate — residential and commercial real estate. Residential is the most intuitive, generally describing single-family housing and multifamily housing of 2-4 units (duplex, triplex and quadplex). Commercial real estate is any property that is used for commercial purposes, and is much broader in scope and encompasses several, perhaps unapparent, property types discussed below.
Commercial real estate is everywhere. In the course of a day, you can encounter several examples of commercial real estate: in the morning before work, you stop at the gas station for some gas for your commute into work. Gas station – check. You decide that to make it through your morning meetings, you’ll need some coffee, so you take the most convenient drive-thru at Starbucks. Starbucks – check. You get on the stop and go freeway, passing a movie house, a shopping mall and your favorite baseball team’s stadium. You guessed it: each one of these is considered commercial real estate. An hour and a half later, you arrive at your office building to begin your day when your secretary tells you that you are scheduled to be in conference at a downtown hotel. As you have no doubt figured out, the building where you and your co-workers spend vast numbers of hours of your lives and the hotel where you are supposed to be this morning, are both great examples of commercial real estate.
Commercial real estate can be divided into a few categories for ease of discussion and focus: retail, industrial, land, office, leisure and multifamily.
- Retail property consists of just what you imagine it to be: property that hosts retail stores. Examples would be: the Home Depot, Macy’s, Payless Shoe Source, et al.
- Industrial property consists primarily of factory, research and development, manufacturing, warehousing and distribution centers. Distribution centers, for example, are generally located outside of major metro areas where there is space to house inventory that may be called upon by metro area stores. You may be familiar with one of the more popular research and development parks in the U.S., The Triangle in North Carolina.
- Land zoned for commercial use is considered commercial property. Land designated as farm land is considered commercial real estate. Even land that is raw and undeveloped could be considered commercial real estate.
- Office buildings with no special equipment, but suitable for administrative tasks is commercial real estate. You may encounter some distinctions within the office category, like medical office space.
- Leisure real estate is really several, and quite varied property types. Hotels, resorts, golf courses, stadiums, etc. are considered commercial real estate. In fact, thinking back to the definition of commercial real estate posted above, each of these property types is most assuredly in existence for a “commercial purpose”.
- Multifamily property is shared residential apartment-style or townhouse-style living. We think of this form of commercial real estate in terms of a 5-plex all of the way up to complexes with more than 500 units! These buildings can be very old with few amenities, or brand new with state-of-the-art technology and attractions. Multifamily buildings all can be sub-categorized into garden-style, mid-rise and high-rise depending on the density of apartments built on the parcel of land on which they sit. They can be situated on many acres with open space and parks, or on a downtown city block.
This is a short list with just a few examples. I’m sure that if you sit down and think about it, you could come up with many, many more examples of commercial real estate on your own. Commercial real estate touches our lives everyday. We will explore in much more detail how we, as investors with an eye on securing our financial future, can help our friends and neighbors live more comfortably, derive more convenience in their neighborhoods and enjoy more fully their hard-earned time off through our commercial real estate investments.
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