Understanding Commercial Real Estate: What Do You Need to Know?

Most people think of real estate as either commercial or residential. Within commercial real estate, there are several different types. Each is distinct and serves varying purposes in any given community. So, it is important to understand the different types of commercial real estate and what they include as well as important things to consider when investing in commercial real estate. At Talons Commercial, we are passionate about seeing the community around us flourish and thrive, and we pride ourselves on our relationships with local businesses and being a part of these unique transactions.

What is Commercial Real Estate?

Compared to residential real estate, commercial real estate refers to property that is used exclusively for business purposes. Commercial real estate is necessary for businesses to operate but also serves as a great investment opportunity.

Types of Commercial Real Estate

Properties that are considered commercial real estate come in a few different forms. The major players in commercial real estate are:

  • Retail
  • Office spaces
  • Industrial
  • Multi-family
  • Undeveloped land

Retail

This form of commercial real estate is among the most popular and probably what you think of first when thinking of real estate in terms of businesses. Retail stores can stand by themselves or be a part of strip malls or shopping malls. Since restaurant tenants are also a commonality of these shopping centers, retail real estate is not exclusive to stores that sell products. It can easily include some service focused businesses as well.

Retail shopping centers range in size and are classified according to their square footage. Strip malls are typically smaller in size while power retail centers are much larger and are generally large specialty chains. Shopping malls usually hold the most square footage among the group and are generally the easiest to identify. In terms of investment qualities, location is extremely crucial for retail properties. The better and more populated a location is, the better chance your retail property has at generating business.

Office Spaces

Businesses that do not fall in the category of retail utilize office buildings to conduct their work. Price per square foot of these properties will often depend on amenities, location, and size of the building which all vary from space to space. These properties are divided into different classes: A, B, and C, depending on their readiness to use.

Class A is typically made up of buildings that are newly renovated and ready to use. This class could also have more amenities than others. Class B often means a building could use a few touch-ups or small renovations before it is considered ready to go, and Class C buildings are generally in need of many renovations. This class may require a full face-lift, and may not be located in the best area.

Office spaces have many benefits when it comes to investing in these types of properties. They typically have longer lease periods which generally means they are lower maintenance properties to upkeep. Depending on location and the market, these buildings tend to appreciate in value over a given time period.

Industrial

These types of properties are generally multi-functional and incredibly valuable in terms of investment prospects. Industrial real estate is usually characterized by warehouses and “flex” spaces that can easily be transformed for different uses. Spaces like this are often used as business headquarters, factories, or storage. It is a huge benefit for industrial real estate if the space can be easily repurposed, as a property is generally a profitable investment prospect if it can be utilized for several different industries and activities.

Multi-Family

Properties classified as “multi-family residences” are generally apartment buildings or townhomes. These are considered commercial real estate mainly because of the rental process that occurs between the owner and the tenant. These are sometimes considered lower on the chain of valuable investment properties due to the nature of the leases for these buildings which have to be renewed each year.

Undeveloped Land

Areas of untouched land serve as potential for commercial real estate. Buying land comes with the added benefit of being able to choose what to build. Whether it’s an office space, grocery store, restaurant, etc. land offers you the opportunity for selection. This is another way to go about commercial real estate that allows customization depending on what the area might need or could benefit from.

What To Know About Investing

While investing in commercial real estate can be a great opportunity, it is not one you should take lightly. It is important to do your research if considering investing in commercial real estate before taking the plunge. A good way to go about this is to ask people who have experience with commercial real estate success for advice.

How We Can Help

At Talons Commercial, our team of professional commercial real estate agents is passionate about the Auburn community and seeing it thrive and flourish. Whatever your commercial real estate needs are, we want to come alongside you in this process and make sure your goals are satisfied. By utilizing our relationships within the community, we aim to be the best partner for you in this process. Contact us today to inquire about commercial real estate.