The term commercial property (also called commercial real estate, investment or income property) refers to buildings or land intended to generate a profit, either from capital gain or rental income. Commercial property includes office buildings, medical centers, hotels, malls, retail stores, multifamily housing buildings, farmland, warehouses, and garages. In many states, residential property containing more than a certain number of units qualifies as a commercial property for borrowing and tax purposes.
Commercial buildings are buildings that are used for commercial purposes and include office buildings, warehouses, and retail buildings (e.g. convenience stores, ‘big box’ stores, and shopping malls).
In urban locations, a commercial building may combine functions, such as offices on levels 2-10, with retail on floor 1. When space allocated to multiple functions is significant, these buildings can be called multi-use.
Local authorities commonly maintain strict regulations on commercial zoning, and have the authority to designate any zoned area as such; a business must be located in a commercial area or area zoned at least partially for commerce.
Commercial real estate is commonly divided into five categories:
- Office Buildings – This category includes single-tenant properties, small professional office buildings, downtown skyscrapers, and everything in between.
- Retail/Restaurant – This category includes pad sites on highway frontages, single-tenant retail buildings, small neighborhood shopping centers, larger centers with grocery store anchor tenants, “power centers” with large anchor stores such as Best Buy, PetSmart, OfficeMax, and so on even regional and outlet malls.
- Multifamily – This category includes apartment complexes or high-rise apartment buildings. Generally, anything larger than a fourplex is considered commercial real estate.
- Land – This category includes investment properties on undeveloped, raw, rural land in the path of future development. Or, infill land with an urban area, pad sites, and more.
- Miscellaneous – This catch-all category would include any other nonresidential properties such as hotel, hospitality, medical, and self-storage developments, as well as many more.