COMMERCIAL REAL ESTATE: A COMPREHENSIVE GUIDE

Commercial real estate

  • TABLE OF CONTENTS
  • WHAT IS REAL ESTATE
  • WHAT IS COMMERCIAL REAL ESTATE
  • ADVANTAGES OF INVESTING IN CRE
  • THINGS TO CONSIDER BEFORE INVESTING IN COMMERCIAL REAL ESTATE
  • TYPES OF COMMERCIAL PROPERTY

INTRODUCTION

Do you currently have commercial real estate assets in your investment portfolio? While the stock market continues to show significant volatility, and less risky asset classes such as treasuries offer little to no return on investment, commercial real estate continues to provide an excellent risk/reward profile to investors.

How do you know which type of commercial property is right for you and your business? This article can help you to find a commercial property type that is ideal for your business. Commercial real estate provides venues for companies to carry out daily operations and cater to customers conveniently. Companies generally lease commercial real estate to maintain cost-effectiveness and flexibility. The potential profitability of commercial real estate may surprise you. McDonald’s, probably the world’s best-known fast-food company, derives most of its profits from its property assets, not from food. With its vast global network of premier locations, McDonald’s owns arguably the most valuable property in the world.

WHAT IS REAL ESTATE

Real estate means; ‘Property in the form of land and buildings’.

WHAT IS COMMERCIAL REAL ESTATE

Commercial real estate (CRE) is the property that is used exclusively for business-related purposes. CRE refers to any land, house or buildings used for gaining profits, either by capital gains or rental income. 

There is great joy and pleasure in knowing you own an income-producing property piece of the commerce and business activity that drives the economic engine of the nation.

ADVANTAGES OF INVESTING IN COMMERCIAL REAL ESTATE (CRE)

  • An investment in commercial real estate offers huge profits. By  the purchase of property or raw land you can collect future income stream or capital gain
  • This asset class may enhance an investment portfolio by providing competitive returns, stability, inflation hedging, and diversification.
  • Commercial real estate has been a significant piece of many institutional investment portfolios. 
  • If you purchase a commercial property that has space for tenants, you have opportunities for additional cash flow through rental income. 
  • Commercial property owners can also enjoy the benefits of several tax deductions designed for the business or property owner. 
  • Commercial Real Estate Investments have historically provided excellent appreciation in value that meet and exceed other investment types. 
  • When inflation occurs, the price of real estate, particularly multi-tenant assets that have a high ratio of labour and replacement costs, also rises.

TOP CONSIDERATIONS BEFORE INVESTING IN COMMERCIAL REAL ESTATE

 The commercial side of real estate is also a different beast that requires some additional considerations versus the residential side of the business.

  • Remember everything takes longer. Patience is critical in commercial real estate.
  • Investors need to understand the market they are investing in and having the right know how of the fundamentals (legal implications, competition, vacancy, rents will allow them to make smart investments that could yield high returns. 
  • When investing in commercial real estate, the investor needs to consider demographics and trends for the area. 
  • Risk assessment is very different in the commercial when compared to residential real estate, and varies significantly by property type.
  • It’s essential to understand the dynamics of the property type you are selecting. For example, if you are looking to invest in retail, consider the near- and longer-term impacts of e-commerce on tenant and consumer demand. If you are looking at offices, consider how trends like co-working and telecommuting could impact demand for office space in your market.

TYPES OF COMMERCIAL REAL ESTATE

Below is a list of the different types of commercial properties and their subcategories.

  • INDUSTRIAL
  • MULTIFAMILY
  • RETAIL
  • OFFICE
  • HOTELS AND HOSPITALITY
  • MIXED FIELD
  • LAND

For a complete understanding of the types, let’s discuss them in detail.

  1. INDUSTRIAL

We use Industrial property for industrial purposes. It sounds simple, but it comes in all shapes and sizes and covers a massive range of business types. Small industrial sites include single or double-story buildings zoned for industrial use. Large industrial properties include medium to large warehouses and factories that are designed for manufacturing or storing goods

2. MULTIFAMILY

At its core, multifamily commercial real estate (MFCR) is a term used to describe residential properties with more than five units. Most often, this term refers to an apartment building or apartment complex

3. RETAIL

Retail property is a commercially zoned property used solely for business purposes. It means selling of the product, rather than its manufacture. Retail stores, malls, shopping centres and shops all huddling nicely under the retail umbrella. 

4.OFFICES

 A commercial office is a property that is used by business professionals, medical and dental professionals, tech firms, and more. Standard office space can be divided into separate rooms, and typically includes restrooms, and a possibly a residential-style kitchen. Office buildings can be of different sizes and multiple levels.

5.HOTELS AND HOSPITALITY

A hospitality is a real estate investment trust that owns, acquires, and manages hotels, motels, luxury resorts, and business-class hotels, and leases out space in the properties to guests.

With more and more major hotel chains opting to lease hotel assets rather than own them, the hospitality sector in general offers attractive potential for investors.     

6.MIXED USE PROPERTIES

Mixed-use properties, during their distinction, can be a combination of any of the types as mentioned above of commercial property. For instance, they can be commercial and residential. 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.

7.LAND

We can refer to land used for commercial purposes to generate profit. For instance,

  • Underdeveloped lands such as a farm or a pasture
  •  A piece of land located in a city that has already been developed, but is now vacant.
  •  Land previously used for industrial or commercial purposes, but are now available for re-use.

CONCLUSION

 Commercial real estate is an excellent investment if you have access to much capital, have some spare time, and you have experienced people on your team to help you navigate the complexity of these deals. Yes, the risks are higher with commercial properties, but so is the potential payoff. This article gave you a complete understanding of COMMERCIAL REAL ESTATE, so start making investments in CRE.

For more blogs about real estate, interior design and construction, please visit https://www.landster.pk/blog/

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