Industrial property is often used for manufacturing and logistics uses, as these types of buildings provide greater height clearances and truck docking capabilities for large shipments. As a result, these commercial properties can be some of the most prime assets held in a commercial real estate fund. Industrial properties are generally leased for multiple years with high credit, stable tenants, providing consistent and significant positive cash flows.

Multifamily commercial property ranges from small multifamily buildings in the suburbs to entire apartment complexes to luxury high-rise condominiums in hot areas of major cities. At their core, these properties could be as small as a duplex. Still, most often, real estate investors focus their capital on more significant multifamily properties that offer better risk distribution and greater economies of scale with expenses (bigger is better!).

Typically, multifamily real estate properties have shorter lease terms and higher turnover than more business-oriented commercial properties like industrial and office buildings. However, many markets have experienced greater rent increases in multifamily versus other commercial property types.

Office buildings are the most common type of commercial property, and they range in size from tiny single-unit buildings for single tenants to high-rise buildings with hundreds of tenants. These commercial property types are classified as Class A, Class B, or Class C commercial space, with A being the most prime type of property, with the highest rents, and in the best locations.

Class A office space is usually newly constructed or recently renovated, along with being located in areas that provide high visibility and foot traffic. Additionally, these properties are often in areas with easy access to major thoroughfares and professional property management companies. Often Class A office buildings will have high quality, high credit tenants occupying the space.

Class B office space is usually older than its Class A counterpart, and can sometimes require further capital infusion to bring it up to par for tenants. The benefit to these properties is that they can be solid long-term commercial investments with excellent returns after relatively minor repairs and updates.

Class C office space is primarily an opportunity for a redevelopment project. The most challenging aspect of Class C commercial property is the often high vacancy rate and less desirable location, making them difficult to market and harder to establish stable rent and income streams from.

One of the other most common types of commercial real estate is retail space. These commercial properties can range from small strip malls of a few thousand square feet to sprawling community centers filled with banks, restaurants, and specialty shops exceeding a quarter-million square feet.

Special purpose commercial property is purpose-built for special use cases, making them hard to use or adapt for other commercial purposes. Examples of special–use commercial properties include car washes, churches, and self-storage complexes. These can also include more commonly seen properties like amusement parks, hotels, music venues, resorts, and sports venues.

These commercial property types can also include mixed-use properties that can serve functions for residential property, restaurants, and retail shops all within the same building. Specialty purpose properties provide a high-quality mix of tenants that typically carry premium rental rates and prominent exposure in high-demand areas that offer solid investment opportunities.

Commercial properties that have been utilized as retail space in large urban areas are expected to transition toward healthcare, grocery, and alternative store niches. In addition, concepts that successfully use an online component have flourished, with food delivery, dry cleaning services, and others.

While office spaces have certainly taken a hit because of the recent pandemic, moving forward as the country recovers, office space vacancy rates and rents are expected to stabilize by the end of 2021 as many companies bring their workforces back under their own roofs. Recovery in office has rebounded significantly, with additional upside expected in the future.

A hard-hit commercial real estate sectors include hotel and resort properties, some being predicted to struggle for years. However, in markets where the recovery has been more rapid, these properties are recovering at faster paces.

When it comes to commercial property for real estate investors, warehouse space has the potential to be a top-performer in a fund’s portfolio. E-commerce is driving much of this trend, with experts forecasting 250 million square feet of demand still unmet and ripe for capitalizing on in 2021. Industrial has shown to be extremely recession-resistant over the last several years and is considered a major focus for long-term stability and growth.

Although experts were initially uncertain of the stability of multifamily properties, they’ve proven to be strong performers for commercial real estate investment and they expect that trend to continue as people regain income stability.