The commercial real estate industry touches nearly every aspect of business in the
United States and most parts of the world. Workers can’t perform their jobs without
office space, patients can’t receive care at hospitals and consumers don’t shop at
Wal-Mart without retail space. Commercial property is generally bigger, pricier and
more complicated than residential property, and it’s leased out to businesses instead
of people living in it. Investors buy commercial properties to earn a profit from the
rent they collect, and they may choose to manage them themselves or through a
property management company.
When investing in commercial real estate, investors typically work with a broker who
specializes in the type of property they’re interested in purchasing. The broker can
help them find a suitable investment, guide them through the buying process and
negotiate on their behalf.
As the name suggests, commercial real estate includes all types of buildings and
land that are used for commercial purposes. These can range from warehouses and
manufacturing facilities to office buildings, shopping centers and apartment
complexes. They can also include single-use, standalone buildings like gas stations
and auto dealerships. Vacant land is another category of commercial property, as
well as land that’s been improved with a building but could be repurposed for
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There are two main ways to invest in commercial real estate: direct investment or
syndicated investments. Direct investment involves working directly with a
commercial real estate agent or broker to purchase a property and then either
managing it yourself or hiring a property management company to do so. This is a
good option for small investors who don’t have much experience with real estate,
but it can be risky and requires a substantial amount of cash upfront.
Syndicated investments, on the other hand, involve investing in a group of
properties managed by an investment firm. These firms can be private or public, and
they’re normally able to tap into larger pools of capital than individual investors.
They can also offer more diverse investment options than direct investing, such as
debt and equity financing.
In addition to finding and negotiating on behalf of clients, brokers can also provide
advice on investing in commercial real estate. They’ll be able to tell clients whether
the property they’re considering is in a good location, the potential for future growth
and other factors. They can also help buyers analyze and compare different types of
properties based on their price, cash flow or investment return.
There are a few key differences between residential and commercial real estate,
which makes the specialized services of a broker essential. For example, a dentist
who wants to move their practice into a new space will work with a broker who
specializes in medical and dental property. Likewise, a retail buyer looking for a new
outlet will work with a broker who understands the local market and can locate
locations that will attract customers. They’ll be able to advise buyers on issues like
parking availability, foot traffic and accessibility.