Different Types of Commercial Real Estate Investments
January 31, 2022
So you’re an investor looking to get into some types of commercial real estate investments. If you’ve been searching online you’ve likely found a number of resources that are telling you a wide variety of things about this investment space. To be honest, most of those resources are probably giving you decent information but the fact that you’re still on a journey of deciding what to invest in means that all of your questions haven’t been answered.
What we’ve found is that many investors are looking to find out what types of commercial real estate investments there are and what the differences are between them. The reason being is that if you are an individual investor making decisions working with a firm or fund that has access to high-quality properties you’ll need to understand which of those opportunities will deliver the type of returns you are looking for and over what period of time that will take place.
So depending on the benefits you’re looking for whether it be diversification, generating higher income, capitalizing on tax efficiencies, or appreciation over time you’ll choose investments based on their ability to achieve those outcomes.
Let’s take a look at a number of different commercial real estate assets you can invest in.
The 4 Types of Commercial Real Estate
To simplify your options we’ve narrowed the investment types down to 4. These commercial real estate investment types are going to be the primary assets you’ll find and have access to invest into.
Multifamily Real Estate Investments
This type of asset is going to consist of a commercial level number of units that are typically configured as apartments, condos, or resort-like environments. It’s common for these assets to have hundreds to thousands of units being rented out by tenants. Investors will benefit from relative stability across any economic climate. Depending on the management of the property you’ll find that more cash is generated from higher-end assets.
Retail Space Investments
We’re all familiar with outlet malls, strip malls, banks, and retail centers in highly populated areas. These types of properties are what make up the retail investment type.
Businesses leasing these properties typically operate by selling direct-to-consumer and require a different type of maintenance than you see with other types of commercial real estate investments.
Retail property investors benefit from long-term leases and the potential for rent increases based on the growth of a given geography. Evaluating the retail tenant mix, the growth trajectory of the location, and potential market conditions will give you the insight needed to determine if a specific retail investment opportunity is right for you.
Single and Multi-tenant Offices as an Investment
Office spaces can vary wildly depending on the location. You can find office real estate that includes standalone buildings occupied by a single tenant, strip style office spaces that rent to a handful of tenants, mixed-use buildings that accommodate both retail and residential, and finally the very large high capacity office towers located in major hubs and highly populated suburban cities.
Typical tenants are financial firms, law firms, professional services, marketing, and more.
You’ll find these to have semi-long lease agreements and stable cash flow. It can be costlier to acquire new tenants due to negotiated build-outs in the space to meet the needs of the new tenant, but these same costs are an investment that can get longer-term leases signed.
Single and Multi-tenant Industrial Investments
For properties like these, you will typically find manufacturers, warehousing, logistics, research & development firms, or laboratories. A huge benefit to investors is that these spaces typically have a lower operational risk, and lower CapEx requirements and are critical to prominent supply chains.
All of these factors add up to stable tenants, higher cash flow, and long-term leasing that delivers predictability within your investments.
While there isn’t a high expectation of significant growth with these properties they are definitely a safe bet.
With these considerations in mind, we hope that it helps you better understand the types of commercial real estate investments you can get into and what each of them means for your investment strategy.