What Is Commercial Real Estate?

Unlike residential real estate, which can only be used for living purposes,

commercial property is designed to house businesses and generate income. This

revenue can come from charging rent to tenants, running a business on the

premises or even through the sale of goods and services that are produced in the

property itself. Commercial real estate encompasses a wide range of property types

and uses, including offices, retail spaces, multifamily apartments, industrial

properties and hospitals.

A career in commercial real estate involves a wide variety of responsibilities and

requires specialized education. Those looking to pursue careers in this field should

strategically target specific niches within the commercial landscape based on their

backgrounds and areas of expertise. For instance, those with previous experience

working in restaurants should focus on buying, selling or leasing restaurant space.

Similarly, those with an interest in manufacturing or land development should focus

on that sector of the commercial landscape.

Local zoning laws dictate which areas of a city can be used for commercial or

residential purposes. This helps prevent overcrowding and encourages the growth of

specific industries in a region. For example, a manufacturer may want to locate in a

region with access to an airport and ports so they can quickly transport their

products. Other factors that influence demand for a particular type of commercial

property include consumer spending habits and the overall economy.


Commercial real estate can be a profitable investment for investors with sufficient

capital and specialized knowledge. This is often a more difficult endeavor than

investing in residential real estate, as lenders tend to view commercial loans as

riskier and require higher down payments. Those who choose to invest in

commercial property directly typically work with a real estate agent or broker to

research options and make offers. They may also choose to manage their property

themselves or work with a management company that specializes in managing

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There are eight different categories of commercial real estate, including office,

retail, industrial, mixed-use, multifamily and special purpose. Each of these

categories has its own operational quirks and risk/return profile.


Office space can be anything from a single-tenant building to a massive, multistory

complex with shared utilities and multiple tenant suites. Retail includes shopping

centers, malls and stand-alone stores and can be either multitenant or single-tenant.

Industrial properties are usually larger warehouses that can be used for

manufacturing or storage. Medical office space is a growing segment of the market

and is usually found in hospitals or office buildings. Mixed-use commercial properties

are those that can be used for a variety of purposes, such as office and retail space

or restaurant and hotel space. Multifamily real estate is a category that

encompasses apartment buildings and condo complexes, and special purpose

commercial can include things like churches and movie theaters.

Indirect investment in commercial real estate is a viable option for those who don’t

have the capital to purchase their own property or aren’t interested in managing

their investments on a day-to-day basis. This type of investment is often conducted

through REITs or crowdfunding platforms and involves purchasing shares in

companies that own, operate and lease out commercial property assets. Investors

can also become limited partners in a real estate syndicate or partner with private

equity firms.