Commercial Real Estate

What’s the Best Type of Commercial Real Estate Property for Investors?

Expertise:
4 Articles Written
mirrored glass office building set against cloudy sky

Thinking about investing in commercial real estate? It can certainly be a lucrative venture.

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For those unfamiliar, this type of property is generally defined as land or buildings that are intended to generate a profit in some way.

More specifically, commercial real estate is divided into subcategories. There are four main types, including multifamily, office, industrial, and retail.

Which type is correct for you? It really depends.

Each comes with its own set of pros and cons.

Related: Top Resources for Commercial Real Estate Investors

Pros and Cons of Investing in Commercial Real Estate

Commercial real estate investing can be a great wealth-building tool. Here’s what’s to like and dislike about investing in each of the four types of commercial properties.

1) Multifamily

Risk is typically limited with multifamily properties, such as apartments. High vacancy is somewhat of a rarity. When a tenant moves out, often little needs to be done to re-rent a unit beyond some fresh paint and new carpet. On the flip side, sometimes a lot needs to be done.

2) Office

Office spaces tend to be somewhat of an inflation hedge. Built into leases are increases in the rent. Plus, tenants are usually responsible for all costs, including net rent, taxes, maintenance, and insurance. However, when tenants churn, the vacant space may need major renovations to suit the new renter.

3) Industrial

Capital requirements are quite low with industrial spaces, but it’s an extremely competitive market right now. (Thanks, Amazon.)

4) Retail

High-end retail spaces (like promenades) and low-end spaces (think dollar stores) are currently doing well. But the retail properties that fall somewhere in between, such as strip malls, seem to be falling off.

For added insight into each category, check out my video above!

Which category do you prefer? Why?

Leave a comment below.

Jesse is an commercial real estate broker specializing in tenant representation in the Downtown and Midtown Toronto markets in office leasing and investment sales. Jesse represents clients in various sectors, including tech, start-up, and not-for-profit. As a leasing advisor, Jesse’s goal is to help his clients find flexible real estate solutions for both their short and long-term needs. His training in negotiation at Harvard Business School ensures his clients interests are protected and that optimal deal terms are achieved. Jesse began his career in real estate as an investor in student housing and now focuses on multifamily apartment buildings. Check out more of Jesse's content on the BiggerPockets YouTube channel.

    Brian Gibbons
    Replied over 5 years ago
    Chris, this is great! I come from the financial planning field, and my manager who supervised 20 $300K or more gross annual income financial planners had a sign on the wall, “Follow up 10 times with every prospect or quit working here.” Another is “Persistence in prospecting is the #1 key to self employment.” Another, “If I don’t prospect, I don’t eat.” Until the house sells, I follow up, even if they tell me FOAD. Dont ask me what the acronym means. lol Post cards, texts, phone calls, even a bouquet of flowers and a written offer. Follow up or die.
    Chris Feltus
    Replied over 5 years ago
    Hey Brian, thanks I appreciate it. Your manager certainly has a hardcore approach, but he is right, follow up is key especially in this business. I basically continue mailing unless they ask to be removed from the list.
    Brian Gibbons
    Replied over 5 years ago
    “hardcore” If you fail, is that ok? My metric is how many sellers have I presented to in person. I set a goal of 5 Seller Presentations per week. Are you going to go “on the field of business” to “try” or to “do”? I operate my business to win, not to try. Just like how I play lacrosse, to win. Score goals and stop the opposition from scoring. “Effort without results is meaningless” Know your metrics.
    Lisa Phillips
    Replied over 5 years ago
    Great article! This is a very good mindset to have, “NO is more of a temporary obstacle than permanent objection” I can take this advice to other aspects of real estate business as well. Just wait ’em out 🙂
    Chris Feltus
    Replied over 5 years ago
    Hey Lisa, Thanks for the nice comments, much appreciated. Yes I found changing my mindset to viewing “no” as a temporary objection as you described to be quite helpful. Roadblocks and setbacks will inevitably happen, but changing your outlook can help you work through them and make the most of any opportunity. When I hear the word “NO” right now, the way I hear it in my mind is “not right now” and thats ok, I am working on their time table not my own. If you are patient and genuinely do your best to help them, often times when they are ready, you will be the first they contact again. Take Care
    Eric Blanchard
    Replied over 5 years ago
    Thanks for the article Chris. Your advice works in all kinds of fields. I did door-to-door sales for a while, and learned that the same person on a different day was a different person. The grumpy Gus who chased me out the door would sometimes buy from me several weeks later!
    Chris Feltus
    Replied over 5 years ago
    Hey Eric, thanks for stopping by! Yes you are exactly right in addition to WHO you hit the TIMING can be equally important, as you found. Sometimes it just comes down to luck in regards to timing, but the more consistent you are, the “luckier” you become!