What Is Commercial Real Estate?

Commercial real estate (or CRE) is property that is used for business purposes or to

generate income. This can include anything from a corner fast food outlet to a multiunit

apartment building or even a warehouse. CRE is usually more expensive than

residential real estate and is typically leased out to tenants rather than being

occupied by the owner.

CRE can be divided into six categories:

Industrial: Properties used for manufacturing, distribution or processing. Industrial

spaces can be leased to various businesses and are generally larger buildings

located on more substantial plots of land than residential rental properties. These

spaces are often highly specialized for their intended use, making it difficult to

repurpose them if the original tenant leaves.

Office: Properties used for offices, retail or professional services. Office buildings can

range in size and location from suburban office parks to city skyscrapers and are

leased out to businesses like law firms or insurance companies. Office space can be

leased to multiple tenants or it can be occupied by a single user, such as a

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Retail: Properties used for restaurants and retailers. Retail spaces can be a part of a

shopping center with many different tenants or they can be single-use, standalone

buildings such as a big-box retail store or a pad site leased by a single-tenant

retailer, such as a bank or pharmacy. The retail sector can also be broken down into

categories such as malls and shopping centers, which have multiple tenants but do

not necessarily have a large trade area, versus strip malls that have a smaller

footprint but draw a larger number of customers in a tighter radius.


Mixed-use: Properties that combine both residential and commercial functions. This

can be anything from a duplex with retail and office space to a city-center building

with apartments and office space. This category can be tricky to define, as some of

the most successful mixed-use projects are those that can clearly define and market

their residential component as well as their commercial component, as this allows

for a better balance between renters and users.


Investing in commercial real estate can be a great way to earn steady income, but it

is important for prospective investors to understand the difference between this

type of property and residential property before they begin investing. It is also

important for them to have a team of experienced professionals on hand to guide

them through the process, as there are many intricacies involved that can make or

break a deal. These individuals can assist with everything from zoning laws to

finding potential tenants and negotiating leases. They can also help with obtaining

financing, which may be more challenging than obtaining a loan for a residential

property. Lastly, they can provide valuable insight into the best ways to capitalize on

emerging trends and markets. This is critical, as the success of any investment can

be directly impacted by these factors.