Types of Commercial Real Estate

After hearing the phrase commercial real estate, the first things that often spring to mind are shopping centers, office buildings or warehouses. But technically, there are different categories for commercial real estate and all of the property types are incredibly precise in their definition.

Also its worth remembering that the laws and regulations for commercial property advice/definitions varies from country to country. For example here’s a specific commercial property guide for Malta.

However for a more generic definition, please see below the different types of commercial real estate with a detailed description of their purpose and function.

 

Office

Classification – Commercial properties that are used for offices are grouped into three distinct classes, depending on the quality of the building and its location.

• Class A properties are the best in terms of both the building itself and its location. Examples of these are the prime office buildings found in high-end business centers.
• Class B properties are those that may have high-quality buildings but are on a low-quality location (i.e. located quite remotely, etc.) or vice versa.
• Class C properties are everything else that are not on par with classes A and B.

Central Business District (CBD) – Office buildings that are located in central business districts are usually those from class A because they’re located in the heart of large cities such as New York or Chicago. However, they can also be high rise buildings in smaller downtown areas.

Suburban office buildings – Offices that fall under this classification are usually mid-rise structures of 80,000-400,000 square feet located outside of a city center. Also, in some cities, there are suburban office parks that have different mid-rise buildings arranged into a campus-like setting.

 

Industrial

Heavy manufacturing – Most large manufacturer’s buildings or properties usually fall under this category. These properties vary depending on the company’s specific purpose or on what item they manufacture. These industrial buildings use a wide variety of machinery and often require substantial renovation in order to successfully re-purpose the building for new tenants.

Light Assembly – These properties have simpler structures in comparison to the larger manufacturing properties and usually serve functions such as storage, product assembly, office space, etc.

Flex Warehouse – This type of industrial property is incredibly flexible in terms of its function and can easily be converted into industrial or office spaces.

Bulk Warehouse – Bulk Warehouses are very large properties that are often used for regional distribution of products. Their floor areas can range from 50,000 to 1,000,000 square feet. Trucks are required to be given easy access from these warehouses and to nearby highway systems.

 

Retail

Strip Center – Strip centers have several properties that cater to small retailers. Some strip centers anchor tenants so that they can attract more customers to the location. Examples of anchor tenants are Wal-Mart, Publix, or Home Depot. Strip centers can have a wide variety of different small retail stores. These can include Chinese restaurants, dry cleaners, nail salons, etc.

Community Retail Center – These properties have multiple anchors such as grocery stores and drug stores. They are very large (normally in the range of 150,000-350,000 square feet) which allows them to accommodate a large number of retailers.

Power Center – Power centers cater to small retailers and major box retailers, such as Wal-Mart, Lowes, Staples, Best Buy, etc. The small retailers are located at smaller, inline stores while the big box retailers are on much bigger spaces that usually range between 30,000-200,000 square feet.

Regional Mall – These malls have a larger number of anchor tenants such as department stores or big box retailers like Barnes & Noble or Best Buy. They have a large in floor area, which can range from 400,000 to 2,000,000 square feet.

Out parcel – These are small parcels of land that are located outside of larger retail centers. They are set aside for individual tenants such as fast-food restaurants or banks.

 

Multifamily

Garden Apartments – Garden apartments are low-level apartment buildings that are surrounded by lawns and trees, shrubbery or gardens. They are usually 3-4 stories high with 50-400 available units and often have no elevators or surface parking.

Suburban garden apartments became popular in the 1960s and 1970s because during this time a large number of young people migrated from the urban centers to the suburbs.

Midrise Apartments – These apartments are a little larger than the garden apartments and are located in infill locations. Midrise apartment blocks are approximately 5-9 stories high with 30-110 available units.

Highrise Apartments – These apartments are the largest of the three because they are constructed in larger markets. They are usually more than 10 stories high with more than a hundred available units. The units available here are much more expensive because the whole building is professionally managed.

 

Hotels

Full service hotels – These hotels are top-quality hotels that are usually located in central business districts or tourist areas. Examples of these are big name flags like Four Seasons, Marriott or Ritz Carlton.

Limited service hotels – As their name suggests, these hotels only provide limited services such as room service, on-site restaurants and convention space. This is because they’re often renovated boutique properties that aim to provide a cheap, cost-effective hotel experience to customers.

Extended stay hotels – These hotels are for customers that need to stay for a week or more. They usually have larger rooms that more closely resemble a small home.

 

Land

Greenfield Land – This land has not yet been developed for commercial use. Examples of these include farms or pasture land.

Infill Land – This type of land is found in an urban environment which has been dedicated to the construction of new commercial facilities.

Brownfield Land – This land that has been previously used for industrial or commercial purposes and is often environmentally impaired. However, if correctly renovated and cleaned Brownfield sites can provide a cheap source of land for commercial property development.

 

Special-Purpose

Commercial real estate is very diverse in terms of categories, purpose and function. The categories above cover the most common types of them, but in reality, there are many more types of commercial real estate that can be seen in cities, urban areas and others.

These include self-storage, car washes, theme parks, bowling alleys, marinas, theatres, funeral homes, community centers, nursing homes, and churches.