Have you ever wondered what commercial property actually is? You hear a lot of different terms like retail or industrial, and it can get confusing. When is a property considered commercial versus something else?
At a high level, commercial is often used as a general category to separate a property from being residential in nature. It can also be used to describe properties that do not clearly fit into one specific category.
Once you move beyond residential real estate, there are several main categories that fall under commercial.
Retail
The first major category is retail.
Retail properties are consumer-focused. These are locations where people are going to the business on a regular basis. Because of that, they are typically located in high traffic, high visibility areas.
Think of places like grocery stores or shopping centers. These are businesses that rely on consistent customer visits, and location plays a big role in their success.
Industrial
The second major category is industrial.
Industrial properties are business-focused rather than consumer-focused. In most cases, the general public is not interacting with these properties directly.
Within industrial, there are a few subcategories.
You have manufacturing, where products are actually being created or assembled. You have warehouses, where goods are stored and prepared for shipping, like large distribution centers.
You also have flex space, which combines office and warehouse use. These buildings often have office space in the front and warehouse space in the back, making them useful for businesses that need both.
Office
Office properties can fall somewhere in between business and consumer.
Some office spaces are consumer-facing, like medical offices where patients come in regularly. Others are not consumer-focused at all, like call centers or administrative offices where employees work behind the scenes.
Because of that, office properties can serve both types of users depending on the tenant.
Other Commercial Property Types
Beyond the main categories, there are several other types of commercial real estate.
Multifamily is one of the most common. This includes apartment buildings with five units or more. Once a property reaches that size, it is considered commercial rather than residential.
There are also hospitality properties, such as hotels and other lodging businesses.
Self-storage is another category that stands on its own. These properties operate differently from most other asset types and are often treated as their own class.
Entertainment properties also fall under commercial. This could include anything from sports facilities to businesses like trampoline parks.
Finally, there are special purpose properties. These are buildings that do not fit neatly into any of the other categories. Examples include churches, schools, or other buildings designed for a very specific use.
Final Thoughts
Commercial real estate is a broad category that includes a wide range of property types, from retail and industrial to multifamily, office, and specialized uses. The term itself is often used to separate these properties from residential real estate or to describe assets that do not clearly fit into one category.
Many investors we work with appreciate our clear understanding of the intricacies of commercial properties, rather than the generic scope of agents who handle residential and commercial. If you are looking to buy or sell commercial property in Pennsylvania or Maryland, reach out to us. We are always happy to help.
