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Last Updated on November 27, 2013 By Robert Schmidt 32 Comments

Types of Commercial Real Estate

Commercial real estate can be broken down into several different categories. At a high level, when people think of different types of commercial real estate, they typically think about shopping centers, office buildings, or warehouses. But the commercial real estate industry is much more precise when it comes to defining property types. Below is a list of different types of commercial real estate with a description of how each category is typically defined.

Office

Classification. 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. 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. And Class C is basically everything else.

Central Business District (CBD). Office buildings located in the central business district 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 highrises found in downtown areas.

Suburban office buildings. This classification of office space generally includes midrise 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 midrise buildings into a campus-like setting.

Industrial

Heavy manufacturing. This category of industrial property is really a special use category that most large manufacturer’s 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.

Light Assembly. These structures are much simpler than the above heavy manufacturing properties, and usually can be easily reconfigured. Typical uses include storage, product assembly, and office space.

Flex warehouse. Flex space is industrial property that can be easily converted and normally includes a mix of both industrial and office space.

Bulk Warehouse. 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.

Retail

Strip 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, etc.

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.

Power 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.

Regional Mall. 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.

Out parcel. 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.

Multifamily

Garden Apartments. 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.

Midrise Apartments. These properties are usually 5-9 stories, with between 30-110 units, and elevator service. These are often constructed in urban infill locations.

Highrise Apartments Highrise apartments are found in larger markets, usually have 100+ units, and are professionally managed.

Hotels

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.

Land

Greenfield Land. Greenfield land refers to undeveloperd land such as a farm or pasture.

Infill Land. Infill land is located in a city has has usually already been developed, but is now vacant.

Brownfield Land. 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.

Special-Purpose

The above categories of real estate cover the major types of commercial real estate. However, there are plenty of other types of commercial real estate that investors construct and own. Examples of special purpose commercial real estate include self-storage, car washes, theme parks, bowling alleys, marinas, theaters, funeral homes, community centers, nursing homes, and churches.

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Reader Interactions

Comments

  1. Candida Bose says

    August 28, 2014 at 2:34 pm

    Thank you so much! It was of great Help! God Bless you!

    Reply
    • Rob says

      July 8, 2015 at 1:46 pm

      Glad you found it helpful!

      Reply
  2. Kiki says

    February 1, 2015 at 12:48 am

    Thank you! I want to learn commercial real estate. Can anyone recommend a book that has everything from A to Z?

    Reply
    • james90210 says

      July 14, 2015 at 12:26 am

      John M Peckham “A Master Guide to Income Property brokerage”, worth every penny I have paid for it

      Reply
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    • Nathan Bernhardt says

      September 1, 2015 at 12:22 am

      Go to my library at
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      Reply
  3. Lukelo Mkuye says

    February 11, 2015 at 8:46 am

    Great help in deed..!

    Reply
  4. msa says

    May 13, 2015 at 3:34 pm

    Thank you so very much

    Reply
  5. Pelham Higgins says

    June 29, 2015 at 2:41 am

    Out of interest, where would self storage and data centres fit?

    Reply
    • Rob says

      July 8, 2015 at 1:46 pm

      Special purpose.

      Reply
  6. Stan says

    July 2, 2015 at 3:28 pm

    Thanks for the easy to understand info.

    Reply
    • Rob says

      July 8, 2015 at 1:46 pm

      Sure, I’m glad it’s useful to you.

      Reply
      • https://goo.gl/qhStLf says

        October 3, 2016 at 6:11 am

        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.

        Reply
  7. janett morgann says

    October 15, 2015 at 9:35 am

    This is the one im looking for, this is really helpful to us. coz where looking for an real estate site. .thanks a lot for sharing this very impressive one.

    Real estate is an interesting industry for those who are looking for new property to buy . These 50 real estate investment blogs will help people to find the best. I have also read blog at http://californianestates.com/ about real estate property management……

    But i want to learn more.

    Reply
  8. Voting Patriot says

    October 19, 2015 at 3:17 am

    Thank you for this clear outline of different types of commercial property.

    I have a friend who was just telling me that he had been involved in an organization that had 2 companies. A real estate company that found single-family homes that were suitable for rental and a professional management company. An investor could either purchase a property that the company had already acquired and brought up to the company’s standards for a rental property or purchase a property and then either bring the house up to the company’s standards themselves or pay the company to do it. Once the property met the standards of a rental with this company, the investor could find a tenant or have the company do it. The management company would be there to find tenants, mow lawns, shovel snow, fix toilets, etc. I gather an investor could acquire a turn-key facility and have it professionally managed or pick-and-choose what services they wanted from the management company.
    Assuming I understood this correctly, would this be considered a form of commercial real estate?

    Reply
  9. Beth Harvey says

    November 20, 2015 at 5:27 am

    Would a five room bed and breakfast in a residential area that is owner occupied ever be considered as special commercial? You mention that special commercial usually has investors. This property has the owner that does everything from check in the guest to cook to serve to clean, with no full time employees and two part time employees.

    Reply
  10. Cummbottom says

    February 10, 2016 at 12:12 am

    World of REITS apparently, high’market yield metroplitan areas gain prominence where if your care. America due growth of market sectors…Bay Area especially counties near coast lines L.A downtown without economic frowns. Going around immediate returns of 2nd quarter for Class A office REITS majority of Bridge loans from pension funds,investors,insurance funds and banks. Gentrification increase is the “developer” fault to considering fair housing inaccurate lack of public policies inflation going follow. Loans are expensive terms high interest why so many “shell companies” using establish associations to protect there net gains. Pains eventually dynamic global trade without diplomacy “American” market stagnated Swedish pension funds and banks guilty. Investing in I-REITS and O-REITS high yield Nordic companies have preference “American” realty established market don’t take chances why Bay area realty now highest diverse industries majority soon global cartels gentrified polices of polarization “San Francisco” how many O-REITS 140 permits high rises over 60fls majority international developers looking. Bay area or L.A and San Diego…bubble going burst soon!

    Reply
  11. nick j says

    March 13, 2016 at 12:11 am

    what class would a driving school be?

    Reply
  12. Jerry Drake says

    April 24, 2016 at 1:16 pm

    If I wanted to buy property and store RV’s on it, along with boat and boat trailers, what form of commercial property would I need? (I am in Florida)

    Thanks.

    Reply
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  16. ASHLEA MATTSON says

    November 9, 2016 at 1:35 am

    Good article, Thanks!

    Reply
  17. Baitey says

    November 9, 2016 at 7:13 am

    Great article. Really It’s very informative and helpful. Good job. https://www.baitey.com/

    Reply
  18. Nicole Hodge says

    February 1, 2017 at 1:29 am

    Im looking for a building that can be used for multiple purposes…paint night, pop up shops. But I need a kitchen so that it can be utilized to serve food when building is used and room I can change into a studio type for dance and exercise classes. Which type of building am I looking for?

    Reply
    • Michael Greeby says

      February 8, 2017 at 6:37 am

      Nicole, without knowing any more information about where and what you specifically have in mind, your question really is more one of zoning. Are you looking to be able to perform the multiple functions in the same space on a single level? Will anyone be residing in the building? If not, then retail is typically the most flexible type, particularly if you are planning on preparing food on-site. Each use will place different technical requirements on the space / building so please keep this in mind as well. For example, cooking requires grease exhaust and increase HVAC cooling to offset the heat from the equipment, while dance and exercise studios require greater humidity control and finished flooring materials. I’d be happy to try and give you more help if you need it, but need more info. Cheers!

      Reply
  19. DPP says

    March 1, 2017 at 3:58 am

    Good stuff. will be re-visiting.

    Reply
  20. Vanessa Barnes says

    March 1, 2017 at 9:16 am

    Supply hotels with unique hotel guest amenities such as every day essential products which can be sold in minibar or given complimentary.
    Types of hotel amenities

    Reply
  21. nida says

    June 29, 2017 at 10:36 am

    Lovely article about Types of Commercial Real Estate. It will help me a lot to learn more about how real estate commercial process flow. Thanks for sharing this informative article here. Good job……

    Reply
  22. JoAnn Go Ines says

    September 28, 2017 at 1:47 am

    Looking to buy a building for gymnastics — can we only use Special Purpose commercial property? The Industrial use buildings have the high 18′ ceilings which we need — is this a zoning issue that we’d have to straighten with the city?

    Reply
  23. manisha sharma says

    October 9, 2017 at 9:56 am

    Thanks for the useful information.Good Luck!!

    Reply

Trackbacks

  1. Cap Rate Information says:
    July 10, 2013 at 6:55 pm

    […] take an example of how a cap rate is commonly used. Suppose we are researching the recent sale of a Class A office building with a stabilized Net Operating Income (NOI) of $1,000,000, and a list price of […]

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