Types Of Commercial Real Estate
So you’re in the market for commercial real estate, but what type exactly? Did you know there are actually eight categories of commercial real estate? What are they and which one suits your purpose? Let’s find out.
But where should you buy in Arkansas? How do you know which land is right for your purpose? Is building the best option for you? The expert REALTORS® at The Brandon Group can help you navigate all this and more. Matching you with the perfect property is our passion.
What Is Commercial Real Estate?
Commercial real estate is defined by Investopedia as:
“Real estate that is used for business activities. Commercial property usually refers to buildings that house businesses, but can also refer to land used to generate a profit, as well as large residential rental properties.”
That is not to say that any property can be classified as commercial solely based on what it is used for. Most commercial properties are also zoned as such, for example, a house is classed and zoned as a residential property. This means it cannot be used for commercial purposes without special exemption or rezoning of the area.
Commercial property is also financed, taxed, and legislated differently from other types of property. Some residential property can also be classed as commercial, such as multi-dwelling residences like apartment buildings.
Types Of Commercial Real Estate
As mentioned above, some properties you may consider residential, are actually commercial. While they may be lived in as residential property, they are usually classed as commercial. This is most often determined by how many residences are within the building.
Office buildings low, mid, and high rise are all classed as commercial property.
These properties can be medium to large warehouses used for manufacturing or storage of goods.
These types of properties vary greatly in size and purpose. They can be huge malls and shopping centers to single shop fronts, cafes, pop-up shops, and more.
Apartment buildings or office spaces that feature retail space beneath would also be classified as commercial property.
Fairly self-explanatory, hotels, motels, bed and breakfasts, lodges, chalets, cabins, and more – these are all considered commercial property. They are a business like any other.
This could be in the form of agricultural land, vacant land in a commercially zoned part of a city. The land beneath any commercial premises is considered commercial property as money is earned from its location.
There are many more subcategories and examples of commercial land that do not fall within a specific category, such as:
- Parking lots
- Amusement parks
All of these are considered commercial property.
Buying Commercial Real Estate Vs Residental For Investment
There are pros and cons for both commercial and residential real estate as an investment opportunity. While commercial property usually has higher initial outlays than residential, it also represents the opportunity for larger returns. Commercial property is gaining popularity as an investment strategy over residential for a few key reasons.
Commercial tenants are most often solely responsible for maintenance, insurance and taxes associated with the property during occupancy. For residential properties, these costs and hassles are borne by the owner/investor.
Commercial tenants also tend to be less of a headache than residential as you are dealing with a professional company rather than an individual. Rental markets for commercial properties are often more stable than residential markets, which are inherently more volatile. In commercial properties, tenancies are usually for a period of years and offer better stability than residential.
Buying Vs Leasing Commercial Property
If you are a business owner, should you buy or lease commercial premises to work from? This will really depend on your financial position and long-term plans for the business, nevertheless it can be a difficult decision to make.
Leasing offers you greater flexibility than buying. You can move and change out your location depending on your business needs without being locked into a financial commitment. For small to medium businesses, particularly those just starting out, this can be particularly advantageous as you cannot predict what is to come.
Leasing also has significantly lower upfront costs. This means you may be able to afford your preferred premises without compromising on location. Keep in mind that any money you invest in fitting the space out will be lost if your lease ends and the owner declines to renew it.
Buying, however, offers you long-term stability – no one can make you move on from your preferred location. You also have total control over the space and how you want to fit it out.
Buying a commercial property is an expensive exercise however and represents an enormous commitment. This is offset by the ability to plan your expenses over a longer period of time, however, with no rental increases. Should you decide to sell in the future, you also stand to make capital gains and end up better off than if you had paid rent all those years.
Find The Right Commercial Property Solution
Whether you’re just getting started with your own business and need a great leasing location, want to invest in commercial property, or sell one, The Brandon Group can help. Our tailored brokerage services include comprehensive, professional support for both commercial investment and sales on any scale.
Should you need advice and guidance on securing a commercial lease, we also offer a range of listings to suit.