Commercial

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The term commercial property (also called commercial real estate, investment or income property) refers to buildings or land intended to generate a profit, either from capital gains or rental income. Commercial property refers to real estate property used for business activities. Commercial property usually refers to buildings that house businesses, but it can also refer to land that is intended to generate a profit, as well as larger residential rental properties. The designation of a property as a commercial property impact the financing of the building, its tax treatment and the laws that apply to it.

Commercial property includes:

  • shopping centers
  • grocery stores
  • office buildings
  • manufacturing shops
  • and much more.

From an investment perspective, commercial property has traditionally been seen as a sound investment. The initial investment costs of the building and the costs associated with customization for tenants are much higher than residential real estate, but the overall returns are also higher, and some of the common challenges that come with tenants aren't present when dealing with a company and clear leases.

In addition to more control over lease terms, commercial property tends to have more straightforward pricing considerations. An investor in commercial properties will have an income statement that shows the value of the current leases, which can be compared to the capitalization rate of other commercial property opportunities in the area.

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