Commercial real estate refers to non-residential immovable properties that generate income. These properties can be anything from a single-tenant office building rented to white-collar tenants to a retail shopping center to an industrial warehouse and everything in between. The main thing that separates commercial property from residential property is the use. Commercial real estate investors seek income from rental, lease payments and price appreciation.

While many people dream about becoming a billionaire by investing in real estate, the fact is that commercial property is more complicated than residential investment properties and can require a significant upfront investment. That’s why most people who want to get involved in commercial real estate choose to work with a broker. A broker can help them understand the different types of properties and find the right ones to fit their investment strategy. Also read

There are eight major categories of commercial property, including office, retail, industrial, mixed-use, multifamily and special purpose. Each type of property has its own operational quirks and risk profile. Investors can invest directly in commercial property by buying and managing it or they can join a real estate investment trust or syndicate to purchase a portfolio of commercial assets.

Office buildings are the most common commercial property type. These buildings include spaces that are leased to companies that operate businesses, like accounting firms and investment advisors. They may also have specialized uses, such as a dental office or research lab. Typically, these spaces are located in commercial areas where rents are higher.

Retail property is the next most common type of commercial real estate. These properties are leased to businesses that sell their goods or services to consumers through storefronts. They are often highly trafficked and can be sensitive to changes in consumer discretionary spending.

Industrial property includes large warehouses that are used to store, distribute or manufacture products. These facilities can be located in rural, urban or suburban settings and are generally considered an asset class with stable income streams and low operating costs.

Mixed-use commercial property includes any structure that has more than one type of use and does not fall into the other category of commercial property. For example, a retail shipping center with a multifamily apartment complex is a mixed-use commercial property.

Resort property is another broad category of commercial real estate. These properties are located in desirable, tourist destinations and are used to host events, such as weddings and conventions. The revenue generated from these events helps to sustain the hotel and any related restaurants or retail stores.

Special-purpose commercial properties include open land for fairs and amusement parks, church properties, self-storage and bowling alleys. These properties are not a traditional part of any other category, but they can produce a steady stream of cash flow and provide capital gains to investors over time. As a result, they are often an attractive investment option. NerdWallet writers are subject matter experts who use primary, trustworthy sources when preparing content for our audience. We rigorously review our work for accuracy and relevance.