Does commercial real estate fall into many sub-categories?
Commercial real estate is divided into many sub-categories or classes, including:
• Office buildings (both large and small, multi- or single-tenant, professional office buildings and multi-story buildings)
• Industrial (including research and development buildings, warehouses, manufacturing buildings)
• Retail/restaurant (retail strip buildings, single-Anultitenant retail spaces, shopping centers) or big-box retail centers (anchored by regionally or nationally recognized brands)
• Multi-family (any multiple unit development larger than four units)
• Land (developed or undeveloped, rural/urban with intent for future use)
• Miscellaneous property (hospitality, health care, rehabilitation centers, and self-storage)
What are some other important areas of commercial real estate development?
According to NAIOP, some other important areas of commercial real estate investment include mixed use, brownfield regeneration or development, wind energy development, and urban waterfront development.
What are the most basic elements to understand and evaluate the success of commercial real estate investments?
The most basic elements of commercial real estate investment are similar to those elements used to analyze many investment opportunities, including cash inflows/outflows, the timing of receivables, and capital risk.
What about cash flow and real estate deals?
In the short term, most real estate deals are quite cash-intensive investments, with little room to recover these costs in the near term, or until the property is sold or leased. They require cash to purchase, to use for a down payment, to repair, to maintain, for taxes, homeowners fees, emergency repairs, utility bills management, and marketing fees, among many other costs. In your initial analysis, you should recognize that nearly all real estate deals will require a considerable amount of cash. Ultimately, because of this large, chronic cash requirement, you should ensure the reward for such an investment outweighs the risks you must take to enter into this type of investment.
