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Commercial Real Estate InvestmentThe number of investors involved in Commercial real estate investment is significantly lower than the number of Residential investors. There are several factors responsible for this discrepancy. Two of the major factors are the prohibitive costs involved and the much more complicated legal and zoning requirements. These complications arise from the fact that commercial properties are several times larger in scale than most residential properties. Let's begin by discussing the different sub-categories that make up the general category of commercial real estate. These include office, multifamily, retail, industrial and hospitality. Each of these categories has different characteristics not shared by the others, which is a major reason for the additional complexities involved in commercial real estate investment. Multifamily properties are buildings that contain five or more dwelling units. These include apartments, townhouses, student housing and military housing. This category is very similar to residential investing, which makes it very appealing to potential investors. Office real estate includes hi-rise towers, mid-rise towers, office over retail properties and single tenant spaces. These properties are used by business tenants to conduct their day to day operations. The hospitality category includes motels and hotels. To be considered a hospitality property, renters are allowed to stay for a period not exceeding thirty days. Sub-categories within the hospitality category include upscale, mid-scale, luxury, extended stay and limited stay facilities. Included in the limited stay category are some mid-scale, budget and economy properties. Industrial properties include research and development facilities, manufacturing and warehouse facilities. As suggested by the name, retail properties are buildings that are used to conduct retail business. This includes free standing malls, strip centers, retail outlets and single tenant spaces. Benefits of commercial real estate investing include a relatively high income yield, secure long-term cash flow (due to the extended lease contracts usually involved) and lower maintenance costs. Maintenance for commercial properties is generally the responsibility of the tenant as opposed to the landlord, in contrast to residential leases. In terms of stability and growth, commercial properties have also performed well compared to other types of investments. However, as with many types of investments, there is a direct correlation between current market conditions and the performance or profitability of commercial real estate investments. Other conditions that can effect the performance of commercial investments are location, the changing needs and requirements of tenants, as well as the quality of tenants. Although commercial real estate investment has long been the playground for the 'big dogs' (those with the large amounts of capital required), there is a way for the smaller investor to profit from commercial properties by investing indirectly through Real Estate Investment Trusts (REITS). REITS are mutual funds that invest in real estate properties as well as mortgage portfolios. They are sold on the major exchanges,are professionally managed and receive certain special tax considerations. REITS often provide higher yields as well as being more liquid than direct property investment.
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