Commercial Real Estate Asset Classes or Property Types?


The main four commercial real estate asset classes property types are: Multi-Family, Retail, Office, & Industrial. Property types are mistakenly referred to as asset classes by many within the real estate industry. There are actually five main types of assets: Equities, Fixed Interest, Cash, Currency, and Real Estate. As you can see, commercial real estate (CRE) is an asset type as a whole. The subtypes of commercial real estate should be referred to as property types (or sometimes product type).

For example, Proctor & Gamble is a maker of consumer goods. They make everything from pet foods to cleaning agents. They take their manufactured items and sell them in grocery stores. Does Proctor & Gamble categorize each of these items as asset types or product types? The answer would be the latter. The same goes with commercial real estate. The CRE industry has assets which are properties. We further categorize the properties by a category (known as property type or product type). Each of these property types can be further subcategorized. For example, office properties have subcategories of single-tenant, multi-tenant, etcetera.

The Four Main Property Types (not asset classes):

Multi-Family: (aka apartments) This group includes duplex homes and properties used by multiple family groups. Condos are frequently called multi-family because of their construction as a group, but are normally listed and sold as single family residential units. Duplex homes are also frequently listed and sold as residential units to a buyer that lives in one side and rents out the other.

Retail: This group includes single buildings and multi-tenant buildings used as stores for clothing, electronics, and any consumer product. Restaurants are a specialty subset of the retail category, with some listings shown as restaurant/retail. Valuations can be based on size and land value, retail sales per square foot, or other investment return calculations.

Office: A single building designed for office use, or a group of offices in a single building or cluster of buildings. Office properties can be valued based on the rental income return on investment, rather than methods using square footage and land value. Subcategory property types for office include medical and dental offices.

Industrial: are properties with an industrial use. This property type ranges from smaller properties, often called “Flex” or “R&D” properties, to larger office service or office warehouse properties to the very large “big box” industrial properties. Examples include distribution, manufacturing, and warehouse facilities.

Helpful Resources about Property Types:

WikipediaAbout.comWiki – Property TypesFor Dummies

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