Commercial real estate builders refer to those who only build, manage, or deal in commercial real estate projects. Considering the fact that building commercial projects require different kinds of permits, manpower and expertise than that of residential projects, these often the real estate builders are choosing to restrict themselves in one type – commercial or residential.
In the words of the top commercial builders in India, a property gets classified as a commercial real estate when it is built for the purpose of exclusively being used as a place to carry out business. Commercial Real Estate includes can be broadly categorized as retail which include stores and restaurants, industrial that includes factories and warehouses and corporate parks which include spaces used for corporate offices.
Commercial real estate builders are growing steadily in India, especially in the metropolitan and bigger cities like Mumbai, Delhi, Bangalore, Kolkata, Hyderabad. However, one thing that is noticeable is that as an effect of pandemic which popularized the work-from-home culture in India and as a result the workforce for distributed even to the 2 and 3 tier cities unlike the previous situation when workforce were mainly concentrated in the bigger cities, real estate builders in the smaller cities are also now considering commercial real estate as a big opportunity.
Are you interested in investing in Commercial Real Estate? Then this article will help you out. Keep reading.
COMMERCIAL REAL ESTATE: HOW IS IT DIFFERENT FROM RESIDENTIAL REAL ESTATE?
When discussed with some of the best commercial real estate builders in India, several points came up as to how commercial real estate differs from the residential one.
- Purpose – Commercial Real Estate properties are specifically built to generate income for the lessee or the investor. The primary purpose of residential property, like, condo, townhouse, home, is for a person or family to live in.
- Occupancy – Buildings with large apartments and high-rise residential buildings with more than five units are considered to be commercial buildings which are usually classified as multi-family properties. Any residential buildings with one to four rental units as a part of the property, are considered residential real estate.
- Length of Lease – The length lease for CRE ranges from 5 to 10 years and even more. Whereas lease length for residential properties are mostly annual.
- Rates – Commercial real estate prices are usually evaluated based on the valuation calculated by the valuation of the square footage of a property. Residential real estate properties are priced as the annual sum of monthly rent.
DIFFERENT TYPES OF COMMERCIAL REAL ESTATE PROJECTS
Commercial Real Estate is divided into 8 distinct types. They are –
- Office Space:
Office spaces include all office buildings with workspaces. These are available for rent for different businesses to work from.
2. Industrial Space:
Industrial real estate is the real estate used for the purpose of industry which includes heavy manufacturing, assembling work, bulk warehouses, and flexible spaces that can be a mix of both industrial and office space.
3. Multifamily Complexes:
Multifamily complexes are residential rental properties with more than five units like apartment complexes. These are considered to be commercial space because they generate income for the property owner or property management company.
4. Retail Spaces:
Retail spaces are any buildings used for retail purposes. This can be anything from single showroom stores to malls and shopping centers. Large properties such as malls will surely have an original tenant, which would be a larger department store that will draw other retailers to the property.
Hotels fall under CRE and are categorized into –
- Full service hotels with large multiple rooms with at least one bar or restaurant.
- Limited service hotels are small type hotels which have limited services where they do not offer concierge, 24 hours help desks or turn downs.
- Extended stay hotels offer larger rooms.
6. Mixed Use Properties:
As the name suggests, it is the combination of any property types discussed above. For example, mixed use properties could be the multi family apartment buildings with retail spaces on the ground floor.
In this category, farmland, agricultural real estate, vacant land, or brownfield land that was previously used for industrial or commercial purposes and is available for reuse are considered for investments.
8. Special Purposes:
In this category, the commercial properties that are considered would be – amusement parks, theaters, zoos and parking lots.
THINGS TO REMEMBER BEFORE INVESTING IN COMMERCIAL REAL ESTATE
- All property types are not the same.
- You need to know the market, its demand and supply.
- You need to understand the market cycle.
- Do thorough research on the investment opportunity.
- As it is uncertain with any type of investment, it is important to have a contingency plan and capital reserve fund.
- You should prepare yourself for any setbacks and extended timelines.
Hope this article created with inputs from the Best Commercial Real Estate Builders in Mumbai, will help you clear your understanding on the subject. Do you have more doubts or queries on commercial real estate? Put them in the comments below and we will try to answer them with the best of our knowledge.
Also, read our article on: “Commercial Real Estate Closing Costs for Sellers”