Published by Think Realty | November 11, 2023
If you’re interested in investing in commercial real estate, it’s important to consider what type of property is best for your portfolio.
If you’re interested in investing in commercial real estate, it’s important to consider what type of property is best for your portfolio. There are several different types to choose from — and each has its own risks and benefits.
Here’s what you need to know about different commercial properties, so you can make an informed decision about your next investment.
Types of Commercial Properties
There are many types of commercial properties that you might invest in. Here are a few of the most popular types:
1. Apartment Buildings
Although sometimes thought of as residential, most real estate professionals consider apartment buildings with more than four units to be commercial real estate.
Apartments are typically one of the less risky ways to invest in commercial real estate. Why? Because everyone needs a place to live. As long as you’re investing in a commercial apartment complex near heavily populated or up-and-coming areas, you’re likely to find a good investment.
The main reason apartment buildings are safe is that if one tenant moves out, leaving the unit vacant, you can still make up for it with the rent from the other units. Some apartment complexes also have commercial retail or office spaces available in them, allowing you to diversify your portfolio even more.
However, managing an apartment complex requires you to also invest your time — from managing the space to advertising, and handling repair requests. You’ll likely need to hire a small staff to keep your property running smoothly, perhaps through a specialized property management company.
2. Storage Spaces
While it may not be the most glamorous commercial real estate type, storage spaces tend to stand the test of time. No matter the economic outlook, these properties tend to do better than other types of real estate — because commercial properties often respond slower to economic disturbances. They also involve lower maintenance than apartment buildings, since you’re not dealing with people living in your owned spaces.
Just be sure to check out surrounding storage businesses before investing to make sure your property is in a good location.
3. Retail Spaces and Shopping Centers
If you don’t want to deal with an apartment complex, but like the idea of owning a commercial space that’s home to multiple units, you might want to invest in a retail space, like a shopping mall, strip plaza, stretch of retail units, or flex space. This type of business is similar to an apartment since you’ll have multiple tenants, which can allow you to keep the rent lower while attracting new businesses. And if one retailer leaves, you’ll still have income from the others.
But like apartment buildings, managing retail spaces requires a lot of time, so if you’re not looking to answer tenant requests and handle repairs often, consider hiring a property management company or looking for a more passive form of real estate investment.