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Commercial Real Estate Overview

Commercial real estate is commonly considered that part of the real estate market which deals with property meant to generate outside revenues for the real property owner. The type of property could include showrooms, office buildings, retail outlets, as well as just bare land.

If a piece of real estate property is determined as having the potential to generate revenue in the future, it may be considered as commercial real estate. On the other hand, some people may not view real estate that is habitable such as condos and apartment units to be commercial real estate.

Acquiring Commercial Real Estate

Commercial real estate property can be acquired in one of three ways - you can purchase commercial property, take it on rent, or occupy it over the long-term through a lease agreement.

Leasing Agreement

The most common way of acquiring commercial real estate is through a leasing agreement. With a lease, the tenant is allowed to use the property for a defined period of time. The commercial property owner in return gets an agreed rental amount on a monthly basis.

A typical commercial real estate lease is a long-term agreement. Most initially last for at least 10 years; renewal terms may expand that to 20 years or more. Some lease agreements can be made for much longer time periods such as 99 years.

Before signing the lease on a commercial rental property, there are a few things to consider:

  • Number of years for which you intend to use the property.
  • The amount of rent.
  • The amount of extra space provided like such as parking.
  • The length of transition period when the lease has expired.
  • The presence of basic amenities on the premises.

Purchasing Commercial Real Estate

The purchase of commercial real estate property requires a substantial investment. However, there are certain advantages that come with buying commercial property. Developing equity in an office space building can be a sensible way to grow your business.

While purchasing a commercial real estate property, the owner should take care of a few aspects:

  • The laws related to ownership of the property.
  • The amount of floor area of the commercial property.
  • The prevailing price in the market for a similar commercial property in same locality.
  • The presence of basic amenities on the premises.

Renting Commercial Real Estate

Lastly, there is the option of acquiring commercial real estate through renting. This kind of ownership is favorable when the period for which the property is needed is relatively short. With renting commercial real estate there is no set period of occupancy. As a result, it is also the most economical way having a commercial property for the short-term.

The following things need to be taken into account when selecting a commercial real estate property to rent:

  • The rental amount of rent should be justifiable and negotiable.
  • The amount should be at par with rental rates of similar properties in same locality.
  • Access to basic amenities should be available.