Table of Contents
- 1 1. Multifamily
- 2 2. Office
- 3 3. Industrial
- 4 4. Retail
- 5 5. Hotels
- 6 6. Mixed Use
- 7 7. Land
- 8 8. Special-Purpose
Reonomy’s definition of commercial real estate is anything larger than a single-family home.
So, anything from a duplex, all the way up to the largest buildings in the country.
While official classifications can vary from county to county, generally, commercial real estate can be broken down into eight major categories.
Below, we’ll run through the eight different types of commercial real estate, looking at each of the following:
We’ll explore different building types, property and land use types, and skim through some examples of each asset class along the way.
Click here if you’re looking to read up on the different property class levels in CRE.
Multifamily properties are the go-between for residential and commercial real estate.
While they can serve primarily as a residency, the general purpose for the property type is for investment (owner-occupied or not).
The multifamily asset class includes everything from a duplex up through a multi-hundred unit apartment building.
Duplexes are two-unit rental properties, triplexes are three-unit properties, and quadruplex, four units. Pretty straightforward.
The “plex” suffixed property types are found in virtually every market, but are more for beginning investors and those that would like to make a profit on their own residence (by renting out other units).
Apartment buildings, on the other hand, are typically distinguished as being low, mid, or high rise based on the amount of stories they have.
Suburban garden apartments started popping up in the 1960s and 1970s, as young people moved from urban centers to the suburbs.
Garden apartments are typically 3-4 stories with 50-400 units, no elevators, and surface parking.
Essentially, it is a collection of low-rise apartment buildings on one piece of property, those of which may share yard or other land space.
These properties are usually 5-12 stories, with between 30-110 units, and elevator service. These are often constructed in urban infill locations.
High-rise apartments are found in larger markets, usually have 100+ units, and are professionally managed.
The number of stories is less explicit for high-rise buildings, but typically once you exceed 10-12 stories, most markets will consider the building as a high-rise.
Once a high-rise building exceeds 40 stories and meets a certain height, it’s generally considered a skyscraper.
Like multifamily properties, office buildings are also designated to low, mid, and high rise based on their size.
Class A, B, and C Office Buildings
Office buildings are usually loosely grouped into one of three categories: Class A, Class B, or Class C.
These classifications are all relative and largely depend on context—i.e. the location of the building and health of its surrounding market.
Class A buildings are considered the best of the best in terms of construction and location.
Class B properties might have high-quality construction, but with a less desirable location.
Class C are those that might be fairly dilapidated and in an unfavorable location.
Central Business District (CBD)
Office buildings located in a central business district (CBD) are those that are in the heart of a city.
In larger cities like Chicago or New York, and in some medium sized-cities like Orlando or Jacksonville, these buildings would include high rises found in downtown areas.
Suburban Office Buildings
This classification of suburban office space generally includes mid-rise structures of 80,000-400,000 square feet located outside of a city center.
Cities will also often have suburban office parks which assemble several different mid-rise buildings into a campus-like setting.
Industrial properties can also vary quite a bit in size, depending on their specific use-cases.
This category of industrial property is really a special use category that most large manufacturers would fall under.
These types of properties are heavily customized with machinery for the end user, and usually require substantial renovation to re-purpose for another tenant.
These structures are much simpler than heavy manufacturing properties, and usually can be easily reconfigured.
Typical uses include storage, product assembly, and office space.
Flex space is an industrial property that can be easily converted and normally includes a mix of both industrial and office space.
Flex space can also be considered mixed-use, which we’ll discuss in more detail below.
These properties are very large, normally in the range of 50,000-1,000,000 square feet.
Often these properties are used for regional distribution of products and require easy access by trucks entering and exiting highway systems.
Strip / Shopping Center
Strip centers are smaller retail properties that may or may not contain anchor tenants.
An anchor tenant is simply a larger retail tenant which usually serves to draw customers into the property.
Examples of anchor tenants are Wal-Mart, Publix, or Home Depot.
Strip centers typical contain a mix of small retail stores like Chinese restaurants, dry cleaners, nail salons, and so on.
Community Retail Center
Community retail centers are normally in the range of 150,000-350,000 square feet.
Multiple anchors occupy community centers, such as grocery stores and drug stores. Additionally, it is common to find one or more restaurants located in a community retail center.
A power center generally has several smaller, inline retail stores, but is distinguished by the presence of a few major box retailers, such as Wal-Mart, Lowes, Staples, Best Buy, etc.
Each big box retailer usually occupies between 30,000-200,000 square feet, and these retail centers typically contain several out parcels (see below).
Malls range from 400,000-2,000,000 square feet and generally have a handful of anchor tenants such as department stores or big box retailers like Barnes & Noble or Best Buy.
Most larger retail centers contain one or more out parcels, which are parcels of land set aside for individual tenants such as fast-food restaurants or banks.
Full Service Hotels
Full service hotels are usually located in central business districts or tourist areas and include the big-name flags like Four Seasons, Marriott, or Ritz Carlton.
Limited Service Hotels
Hotels in the limited service category are usually boutique properties.
These hotels are smaller and don’t normally provide amenities such as room service, on-site restaurants, or convention space.
Extended Stay Hotels
These hotels have larger rooms, small kitchens, and are designed for people staying a week or more.
6. Mixed Use
Mixed use properties, while their own distinction, can actual be a combination of any of the aforementioned types of commercial property.
The most common form of mixed-use properties, especially in cities, are retail/restaurant properties with offices or residences sitting atop.
Think of your general downtown high-rise building, and there’s a good chance that the asset is considered mixed-use.
Typically, mixed-use properties are some combination of office, residential/multifamily, retail, and/or industrial.
Greenfield /Agricultural Land
Greenfield land refers to undeveloped land such as a farm or pasture.
Within this bucket would be different types of agricultural land as well, like orchards, animal farms, ranches, and more.
Infill land is located in a city that has already been developed but is now vacant. Infill is strictly associated with the development of real estate in urban locations.
Brownfields are parcels of land previously used for industrial or commercial purposes but are now available for re-use.
These properties are generally environmentally impaired, or at the least, are suspected of being so due to previous commercial uses.
The above categories of real estate cover the major types of commercial real estate.
However, there are plenty of other types of real estate that would be considered commercial, that investors construct and own.
That’s where the idea of “special purpose” property comes into play. It is more or less the miscellaneous classification of CRE.
Examples of special purpose properties include amusement parks, bowling alleys, parking lots, stadiums, theaters, zoos, and much, much more.
While there is quite a bit more that CRE professionals need to learn with regards to each asset type over time, having a general understanding of the different types of commercial real estate is a great place to start.