What is Commercial Property?
Commercial property refers to real estate intended to generate profit, either from business activities or rental income.
The sole purpose of a commercial property is to generate income for the real estate owners, either through business transactions that go on in the place or through regular rent paid by tenants for occupying the property. Commercial properties include shopping centers, office buildings, hotels, warehouses, restaurants, etc. Generally, they are real estate used exclusively for business-related activities.
In many countries, the government prohibits people from setting up a business in certain residential areas. Instead, there are specific areas with properties designated for business activities. Depending on the type of commercial property, people may not live in such properties since they may be an official place of work. However, some commercial properties are residential properties in which people live. Typically, such properties generate revenue for the owners through rent.
Most real estate experts broadly categorize commercial properties into the following categories:
- Retail: This comprises properties that house retailers and restaurants. For instance, properties housing Chinese restaurants, Wal-Mart, Nail salons, etc., fall under this category, and they are the most common type of commercial property.
- Hotels: Regardless of the size or rating, all hotels are commercial properties. It includes full-service hotels, limited-service hotels, and extended stay hotels.
- Industrial: These are real estate where heavy manufacturing takes place. You will find them mainly located outside of urban areas, especially along major transportation routes.
- Office: These are generally buildings where official day-to-day business activities take place. You can find them in urban and suburban areas.
- Multifamily: These are buildings where people live and pay rent to a landlord. Though the primary purpose of multifamily is to provide residency, it is an investment for the landlord.
- Land: These are undeveloped real estate where business activities take place – for instance, the plot of land where farmers plant crops and rear animals.
- Special purpose: These are generally real estate that house activities not captured by other commercial property types. They include religious centers, parks, marinas, etc.
Commercial Property Example
Commercial property includes medical centers, hotels, malls, retail stores, farms, warehouses, etc. Generally, any real estate where people conduct business activities, such as exchanging goods and services, is a commercial property.« Back to Glossary Index