Thinking of investing in Commercial Real Estate, but new to the CRE arena? We hope this and our future Guides will be of benefit to you.
Let’s start with the Basics, simply put, Commercial Real Estate or CRE, refers to property that is acquired or developed to generate an income and a return on an investment. This property can be land or building(s) which should make a profit, either from capital gain [a profit from the sale of property], or rental income [any payment you receive for the use or occupation of property].
Each Commercial Real Estate property type (in the industry referred to as asset classes), can be divided into sub-categories and quality classes.
The Commercial Real Estate arena is vast, but the “4 Major Asset Classes” are:
These “4 Major Asset Classes” are generally defined as:
- Office – This class has structures used primarily for conducting business relating to administration, clerical services, consulting, and other client services not related to retail sales. Office buildings include single or multi-tenant properties, from small professional office buildings to office towers, and everything in between.
- Industrial – This class ranges from smaller properties, often called Flex Space, Studio or R&D [Research & Development] properties, to larger “office service”, which include Showrooms, Distribution Centers, Garages, Manufacturing or Office Warehouse properties, to the very large “big box” industrial properties.
- Retail – This class ranges from single-tenant buildings, such as a Walgreens and CVS, to large mega-malls. It includes pad sites on highway frontages, small neighborhood shopping centers, larger centers with grocery store anchor tenants, “power centers” with large anchors such as Best Buy, Staples, and so on, even regional and outlet malls.
- Multifamily – This class comes in all shapes and sizes, ranging from dense, high-rise, urban apartment buildings to sprawling, resort-style complexes in the suburbs, complete with swimming pools, fitness centers and outdoor patios. Generally, anything larger than a fourplex [a building that contains four separate apartments] is considered commercial real estate.
Finally, there are many asset classes, and nearly every property type can be divided not only by asset class, but also by quality, labeled as Class A, B or C.
Learn more in our next installment of, the Beginner’s Guide to Commercial Real Estate (CRE) – Part 2.