Do you ever wonder how much the office buildings downtown are worth? Ever stroll through a shopping center and wonder how much of a return it generates? If so, or if you enjoyed playing the game Monopoly, you might be looking to invest in commercial real estate (CRE). Investing in CRE refers to investing in any business property that generates income and is non-residential. Standard-term leases are usually from 3-5 years and could go up to 10, though they can be much shorter leasing out apartments. Like any market, there is fluctuation and many other factors that determine value. CRE is an umbrella term that breaks down into several distinct categories.

1. Office Space 

Office space is generally considered a sound investment and is classified under A, B, or C ratings. Class A office spaces in commercial real estate are high-end all the way and the most expensive to build, maintain and rent. They boast everything an elite tenant needs, from state-of-the-art design to onsite management to amenities like a full-time staffed lobby and high-speed Wifi. These are not built without consideration given to the location of the building site in proximity to things that will cultivate a high value, such as the prestige of downtown. B and C ratings drop in all categories accordingly.

2. Retail Space

This could apply to the candy store a few blocks from downtown or the biggest mall in the state. Traditionally retail is more expensive per square foot than office space because the intention is to create revenue and so like any other salient detail, it’s factored into the price. Malls and bigger spaces try to attract anchor tenants to add ethos to the property and to generate ripple traffic to the other stores, especially coffee shops and restaurants. 

3. Multi-family Unit Space

Multi-family units such as apartment buildings are commonly defined as a structure housing five or more units. Leases are generally much shorter than other types of commercial real estate because landlords are dealing with people’s finances and are not a more reliable business model. Depending on the neighborhood and other factors, including vetting of tenants, this is a safe and profitable type of CRE in which to invest. On the other hand, if you don’t have a proper building manager for maintenance and the like, and depending on the condition of the building, you could be pouring in your own time and resources. 

4. Industrial Space

These are the buildings in which industry is operating, such as warehouses, production or assembly of goods, and distribution centers. Usually, they are located in industrial parks because these buildings require specific zoning requirements unique to this class of commercial real estate. Triple net leases, in which generally the tenant pays a lower monthly lease but picks up other costs, are often used in industrial CRE.