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

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

1 min read
Jesse Fragale

Jesse Fragale is a 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, startup, and not for profit.

Experience
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 at Harvard Business School in negotiation 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, focusing today on multifamily apartment buildings. He looks for properties with a compelling value-add thesis and employs buy and hold strategies.

Press
Most recently, Jesse has been sharing his experience and knowledge of the commercial real estate industry as a contributor to the BiggerPockets real estate network, specifically contributing to the blog and BiggerPockets YouTube channel. He was also featured on episode #220 of the BiggerPockets Podcast.

Education
Jesse earned a Bachelor of Arts with honors from Wilfrid Laurier University, a Masters of Business Administration (Finance and Strategy) from Laurier School of Business and Economics, and a Leadership and Negotiation Certificate from Harvard University.

Accreditations

Canadian Real Estate Association (CREA)

Ontario Real Estate Association (OREA)

Real Estate Council of Ontario (RECO)

Toronto Real Estate Board (TREB)

Developing Leaders Program – National Association of Industrial & Office Properties (NAIOP)

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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.