What is Commercial Real Estate? Part I
There are two primary categories of real estate - residential and commercial. Residential is pretty straight forward; it’s the housing structures we live in. And on the face of it, commercial real estate is equally straight forward; it’s real estate used in commerce. Sounds simple, but commercial real estate is much broader than residential.
What Is Commercial Real Estate (CRE)?
Commercial real estate (“CRE”) refers to property used for business-related purposes (retail stores, gyms) or as workspaces (office buildings), as opposed to living spaces. (Multi-family rental properties are residences for the tenants, but considered commercial real estate for the owner/landlord.)
Commercial real estate is usually leased to tenants for them to conduct their own commercial activities. There are several categories of commercial real estate, as everything ranging from restaurants and barber shops to shopping centers and retirement homes are considered CRE.
KEY TAKEAWAYS
Commercial real estate is property used for business or income-generating purposes
The classes of commercial real estate include: office; industrial; retail multi-family, hotels, land and special purpose. Many investors consider office, industrial, multifamily and and retail to be the primary categories. (In part 2 we explain each category in detail)
Commercial real estate is typically leased, and provides rental income as well as the potential for capital appreciation.
Investing in CRE is typically more capital intensive and entails more complexity than residential real estate.
Private equity funds, publicly traded real estate investment trusts (REITs), crowdfunding platforms, and private syndications are some of the ways that individuals can invest in commercial real estate.
We have also attached a PDF version of this first course.
In Part 2 of What is Commercial Real Estate we will break down each category of commercial real estate in detail.
- Courtesy of Own Our Own Investor Education Resources