The commercial real estate industry involves properties that are used for business purposes and generate income from tenants rather than individuals living in the units. These buildings can range from office spaces to malls, and can be owned or leased by businesses and investors. Local zoning laws typically slot areas as either residential or commercial, with the latter generally allowing for much larger buildings and spaces. Investing in commercial real estate can be more lucrative than investing in homes and condos, but it also carries with it a higher risk.

Real estate is often seen as a stable investment, but the commercial sector of the market is more volatile and susceptible to economic downturns. As such, it’s important for investors to have a solid understanding of what drives these prices so they can better predict the potential for future losses or gains.

What Is Commercial Real Estate?

There are many ways to make a career in commercial real estate, from a broker to a developer. Most careers involve interacting with clients and helping them find a space that suits their needs. For example, a grocery store may require a certain amount of refrigerated space and loading docks, and they’ll likely want to be in a location that is easy to access by trucking routes. A broker’s job is to help a client find the best property that fits their requirements and negotiate the terms of a lease. Must visit:

A broker can also work on the buy side of the industry, assisting businesses or investors in finding property that meets their needs. This process can include researching the local market, analyzing financial projections and reviewing the property’s condition. Once a buyer is identified, they’ll collaborate with the broker to finalize a sales contract and manage the logistics of closing.

Purchasing commercial property requires a greater degree of due diligence than buying a home, and the process can take longer. Investors will need to complete a more thorough financial analysis, and they’ll have to meet with multiple lenders before they can close on the purchase. Despite these extra steps, the long-term benefits of purchasing commercial property can be well worth it for investors.

No profit-making venture is without its risks, and commercial real estate is no exception. Besides the normal market fluctuations, this type of property can be impacted by natural disasters or loss of rental revenue from businesses that move or close locations. While these problems can impact all real estate markets, commercial properties are more vulnerable to them than residential properties.

Like other investments, commercial property can be accessed by passive investors through a REIT (real estate investment trust), which operates like a mutual fund but focuses solely on real estate. These funds are often diversified, and they can have lower overall fees than individual REITs. In addition, these funds can be traded on the stock market just like shares of other companies. Alternatively, investors can choose to partner with a private equity firm or a syndicator that invests directly in commercial real estate.