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What is Commercial Real Estate?

Commercial real estate is a property that is leased for business and trade purposes. Investing in commercial real estate involves acquiring or developing properties to provide a workspace for commercial tenants.

Unlike residential real estate, commercial real estate owners lease out these buildings and collect rent (monthly or annually) from businesses that occupy spaces in their structure rather than from residential tenants. While we have been mentioning facilities when discussing commercial real estate, raw land purchased for commercial purposes can also be considered commercial real estate. Generally, commercial real estate is divided into six major classes.

Types of Commercial Real Estate

There are various types of commercial properties and asset classes depending on the needs of the client. Hoff & Leigh can list, lease and sell properties in all of these classes:

  • Office Space
  • Retail
  • Industrial
  • Multifamily
  • Special Purpose
  • Land for Development

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Office Space

Office space for rent and office buildings are the most common type of commercial real estate. These commercial real estate asset classes may consist of a single-tenant office building, multi-stories, or even downtown high rises. Typically, these types of commercial properties for lease or sale, can contain from as little as 100 square feet up to 10,000 to 400,000 rentable square feet and be categorized as A, B, and C.

Class A are typically newly built, or recently renovated office buildings situated in a prime location with access to major modern amenities. Professional management companies usually manage office space that falls under the Class A classification.

Class B are typically older buildings that require a bit of capital investment from interested buyers. While they may be currently well-maintained, they usually need minor improvements and repairs. Class B classifications are traditionally the go-to properties for new investors.

Class C are typically poorly maintained buildings used for fix and flip purposes. Class C commercial real estate office spaces are usually situated in poor locations, requiring significant capital investment to either fix dilapidated structures or upgrade the building facilities.

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Retail

Another significant type of commercial real estate asset class is retail buildings for lease or sale. These buildings range from strip malls, banks, restaurants, clothing stores, and community retail outlets and are often located in prime urban locations. Building’s housing big box stores like Best Buy and PetSmart are referred to as retail spaces and can extend from 5,000 square feet to 350,0000 square feet.

Industrial

From small Flexible or R&D properties to large manufacturing warehouses, Industrial buildings are typically focused on manufacturing and storage industries as they boast massive spaces with height specifications. Investing in Industrial, commercial property involves leasing these spaces to manufacturing and production companies in return for an agreed-upon rental cost.

Multifamily

While residential real estate may include multifamily properties for sale, multifamily types may consist of anything larger than a fourplex for commercial real estate purposes. So, multifamily under the commercial real estate sense may consist of downtown high-rise apartment buildings for sale, condominiums, mobile home parks, and particular-purpose housing. Investors delving into multifamily as a commercial real estate investment should consider tenant turnover when making a purchase decision.

Special Purpose

In the world of commercial real estate for lease, particular-purpose properties are properties designed for specific use. Due to its structural design, it is challenging to repurpose these types of properties for another use. Self-storage facilities, car washes, hospitals, hotels, amusement parks, and even schools are examples of particular-purpose properties. Another rising asset class is mixed-use development properties. A mixed-use property serves multiple housing purposes, such as retail spaces and residential apartment units within the same building.

Raw Land for Development

Buying raw or vacant land offers a multitude of options for investors and developers. When purchased at the right time, raw land can have a high return on investment in the right area. That is because land is a limited resource that developers need if they want to expand their businesses. In addition, land is often a more affordable investment than traditional commercial real estate properties. The maintenance costs are significantly lower than with conventional commercial real estate, meaning all you must do is purchase the land, hold the ground, and sell it to a developer for a profit when the time comes. This hands-off approach is one of the main benefits of investing in vacant land.

Contact Hoff & Leigh for Commercial Real Estate Expertise

Finding the right commercial property available in your area to buy or lease and availability can be quite overwhelming due to the growing competition over the limited inventories. Over the years, Hoff & Leigh has become the go-to brokerage for any lessee, buyer, or seller looking to list or find commercial real estate. Hoff & Leigh brokers are well-versed in all types of commercial real estate and can help tenants and owners with their specific needs.