Typically, commercial real estate property is categorized into eight types: apartments/multi-family, office, land, retail, industrial, hotels/hospitality, mixed use and special purpose. However, each type of property can be broken down into subcategories, such as education, healthcare, food service and sales, religious worship, warehouse, and storage etc.
Here I will discuss these common commercial real estate types and their subcategories:
1. Apartment/Multi-Family
Residential buildings in excess of 4 units are referred to as multi-family properties. Commercial multi-family buildings are similar to a residential condominium except that all of the units are owned by an individual, partnership or entity and rented out to multiple tenants. In America people usually call this type of building an apartment.
Garden Apartments: These buildings are located in suburban areas, and many were built during 1960s to 1970s. They are generally 3-4 stories with 50-400 units. Some have elevators and some don’t. Most garden apartments have surface parking, while some have covered parking garages.
Mid-Rise Apartments: Most of these properties are located in urban areas on smaller parcels of land and are generally 5-9 stories with 30-200 units. These apartment buildings have elevators, and some may have a few basic amenities, like exercise facilities, a clubhouse, and a swimming pool.
High-Rise Apartments: These properties are generally found in dense urban areas, with more than 100 units. Typically, a building exceeding 10-12 stories is considered a high-rise. These apartments have reserved covered parking, elevators, exercise facilities, a swimming pool and other amenities.
Once a high-rise building exceeds 40 stories, it’s generally considered a skyscraper. These types of apartments are found in dense urban areas.
2. Office Buildings
Like multifamily properties, office buildings are also designated as low, mid, and high rise based on their size.
Generally, commercial office buildings fall into the following three categories: Class A, Class B or Class C.
Class A: Class A office buildings refer to relatively new construction which has modern technology and design features and facilities consistent with the most current development trends. They are often constructed with high quality materials and located in the best locations to facilitate business and have the highest rents.
Class B: Class B office buildings may have high quality construction and meet some of the most recent technology trends, but are often in less desirable locations than Class A buildings.
Class C: Class C office buildings are all office buildings that are not Class A or Class B. They may include buildings where convenience and modern technology and design features are not a priority, and typically have the lowest rents.
Central Business District (CBD): CBD office buildings are located in the heart of a city downtown area and are concentrated in what is often referred to as the Central Business District. In most cities, you can find a CBD area that has a concentration of high-rise buildings which vary in number and height based upon the size of the city.
Suburban Office Buildings: Generally, suburban office buildings are midrise buildings of about 80,000 to 400,000 square feet located in the suburban area of a city. Developers often assemble several midrise office buildings into what is called an office park.
3. Land
Greenfield/Agricultural Land: Greenfield land generally refers to agricultural land, such as orchards, farms, ranches, etc. It also includes undeveloped lands or pastures.
Brownfield Land: Brownfield land refers the land that was formerly used for industrial or commercial purposes, but now is vacant and ready to be re-used. Because of the former uses, these properties may be impacted by chemical or environmental issues.
Infill land: Infill land refers a piece of vacant land in an urban or suburban area which is surrounded by developed parcels.
4. Retail
Community Retail Center: Community retail centers are generally developed at locations which will provide convenient service for the community. High visibility and convenient access and parking are critical for a successful retail center. The size of the typical retail center ranges from 100,000 to 500,000 square feet. The typical community retail center includes a grocery store along with a drug store and smaller retail stores, like a dry-cleaning store. In Florida a Publix grocery store or a Walgreens or CVS drug store are popular anchor uses which draw more customers for retail centers. You will also find restaurants or some specialty retail stores in the community retail center.
Strip Center: A strip center is a smaller center of around 30,000 square feet or less and is often a single row of retail shops and restaurants facing the street with parking in front. Unlike community retail centers, a strip center may not have an anchor tenant or use. It may consist of a variety of smaller shops, repair centers and restaurants.
Power Center: Power centers are generally occupied by a few major retail stores, such as Wal-Mart, Staples, Best Buy, Office Depot, Home Depot, Target, etc. Each retail store has a size of about 30,000 to 200,000 square feet. Often the parking facilities are located in the center of the parcel so that shoppers can have easy access to multiple stores. These retail stores are located together to provide a variety of shopping opportunities which draw in more customers. There may also be a number of restaurants and entertainment options, such as a movie theater. Some power centers choose to group together a large number of very popular restaurant and entertainment uses as the main consumer attraction and mix in smaller retail shops as supporting uses.
Regional Shopping Mall: Generally, a regional shopping mall refers to a larger shopping center with up to around 2,000,000 square feet. It has multiple large retail tenants as anchor uses, and may include a number of luxury retailers such as Macy's, Nordstrom or Saks Fifth Avenue. There are also a number of smaller specialty retail stores that depend upon the anchor stores to draw in more customers.
Out Parcel: An out parcel refers an individual retail site located adjacent to a shopping center that may share access, signage and parking with the shopping center. It is often developed as an integral part of the shopping center. For example, a large shopping center may have adjacent out parcels for specialty retail stores, restaurants and banks.
5. Industrial
Heavy Manufacturing Buildings: Heavy manufacturing buildings refer to a special use for large manufacturers, such as vehicles, textiles, appliances, electronics, etc. These facilities are often specially designed with customized machinery for a specific manufacturing purpose. When the current manufacturing use ends, they often require substantial renovation to be re-purposed for another use.
Light Assembly: Light assembly industrial buildings are used for storage, product assembly, office space and sometimes include a show room for customers. They don’t have heavy manufacturing equipment and can be more easily converted for another use.
Flex Space: Flex space refers to buildings that can be easily converted into a variety of uses, such as warehouse, office space, mixed use or a light industrial purpose.
Bulk Warehouse: Bulk warehouses are large buildings ranging from 50,000 to 1,000,000 square feet that are used for storing materials or products that are manufactured and sold at other locations. These buildings are often used as regional distribution centers. Typically, they have loading ramps and docks and facilities for delivery and storage of large containers or pallets of different products. Bulk warehouses are located in areas with easy access to road, rail, air and sea distribution networks.
6. Hotels
Full Service Hotels: Full service hotels provide room service, on-site restaurants and a variety of meeting and convention space. They are usually located in or near central business districts, airports or tourist areas. Popular brands of full-service hotels include Marriott, Ritz Carlton, Hilton, etc.
Limited Service Hotels: Limited service hotels are boutique properties that are smaller and don’t provide all of the amenities of a full service hotel. They may have one small restaurant or coffee shop, but typically have no meeting or convention space.
Extended Stay Hotels: Extended stay hotels have larger rooms and may have efficiency or full-sized kitchens to allow guests to cook their own food. They are popular for business travelers who have to stay in one location for several weeks or months or for families on an extended vacation.
A mixed-use property can actually be a combination of any of the aforementioned types of commercial properties.
The most common form of mixed-use properties, especially in cities, are retail/restaurant properties on the bottom with offices or residences sitting atop.
Think of some middle and high-rise buildings, and there’s a good chance that the asset is considered mixed-use.
Typically, mixed-use properties are some combination of office, residential/multifamily, and/or retail.
8. Special-Use Commercial Buildings
In addition to the above general categories of commercial real estate properties, there are also properties that have a special use or purpose, such as buildings used for education, recreation, hospitals, nursing homes, theme parks and churches. There are also smaller or midsize special use commercial properties, such as self-storage, car washes, bowling alleys, funeral homes and community centers.
