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

by | BiggerPockets.com

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

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.

About Author

Jesse Fragale

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.

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