Commercial real estate involves properties used for commercial purposes, as

opposed to residential, which refers to property used as a home. There are different

types of commercial properties, including office, retail, industrial, multifamily

(apartments with five or more units), hotel and special purpose properties. Buying

commercial property provides investors with income streams through rental revenue

or capital gains from the sale of the property.


Commercial buildings are generally larger than residential property and typically

located on more substantial plots of land in high-traffic areas that benefit from high

visibility. As such, they are often more expensive than their residential counterparts.

However, investment in commercial real estate can provide greater returns than

residential property because it is leased to businesses rather than individuals.


What is the definition of commercial real estate?

The technical difference between commercial and residential real estate is that

single-family homes and one- to four-unit rental apartments constitute residential

property, while any building with more than a single-family home or apartment

qualifies as commercial. Multifamily property includes condos, duplexes and

quadruplexes as well as apartments with five or more units. Office, retail, industrial,

multifamily, mixed-use, office and special purpose are the main categories of

commercial real estate. Also read


In addition to these common property types, there are other forms of commercial

real estate that can include hospitals for medical offices, cold storage facilities for

food and other perishables, affordable housing communities and manufactured

housing communities. Investing in commercial real estate can be done directly

through the purchase of individual properties or via investments in a REIT, which is a

publicly traded company that owns and operates a portfolio of real estate assets.

Investors can also become part of an investment fund or syndicate that invests in

multiple property types for a lower overall risk.


A career in commercial real estate requires strong interpersonal and negotiation

skills, as well as a thorough understanding of local tax laws and zoning regulations.

Because the industry is regulated, brokers must be licensed and certified by their

state or territory. They must also have a backup fund of six months to a year’s worth

of expenses in case of a slowdown in activity.


A commercial real estate broker typically specializes in a particular property type or

market segment. For example, an agent who has restaurant experience can

strategically focus on selling, leasing or financing restaurant space. Others choose a

specific industry to target, such as the healthcare sector for hospitals or the leisure

sector for hotels and resorts. To be successful, they must have a solid understanding

of the business operations and financial performance of their clients’ companies as

well as the local economy to make informed recommendations. They must be

comfortable with a variety of marketing and sales strategies as well as have the

ability to analyze a client’s business needs to match them with the right property.

Then, they must negotiate with sellers and buyers to complete the transaction. To

maximize their revenue, a commercial real estate agent should keep abreast of

current industry trends.