What is Commercial Real Estate?

A property is classified as commercial real estate when it is only used for the purpose of conducting business. Typically, commercial real estate is owned by an investor who collects rent from each business that operates from that property.

Examples of commercial real estate include office space, strip malls, hotels, convenience stores, and restaurants. Sometimes, commercial real estate is also owner-occupied, meaning the business that operates at the site is also the owner.

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  • Office Space.
  • Retail Properties include shopping districts, neighborhood centers or standalone retail buildings.
  • Industrial facilities
  • Multifamily Complex
  • Hospitality Venues like hotel, resorts, and elderly housing facilities
  • Health Care Facilities
  • Special Purpose Properties (Religious Centers)
  • Special purpose land
  • Multifamily land
  • Industrial land
  • Retail/oƯice land
  • Solar Farms

A commercial real estate broker is a middleman between sellers and buyers of commercial real estate, who helps clients sell, lease, or purchase commercial real estate. A commercial real estate broker can work as an independent agent, an employer of commercial real estate agents, or as a member of a commercial real estate brokerage firm.
The primary difference between a commercial real estate broker and a commercial real estate agent is that the former can work independently while the latter does not. A commercial real estate agent must be employed by a licensed broker.

Gain access to an extensive database of property listings, including single-family homes, condos, townhouses, luxury estates, and more. We’ll help you find the right property that meets your criteria and fits within your budget.

A commercial real estate broker can help prospective clients save time and money by carrying out the following functions

  • Evaluating business plans 
    A commercial real estate broker evaluates their clients’ business plans to determine their feasibility. They often use statistical analysis (such as break-even analysis) to determine the basic margin of safety on a client’s investment.
  • Understanding tax and zoning laws
    Many individuals refrain from investing in commercial real estate because of the large number of complex rules and regulations governing the taxation and purchase of commercial property. This complexity is compounded by the fact that these rules and regulations vary across states, industries, and zones. A commercial real estate broker must have an excellent understanding of tax and zoning laws to complete the aforementioned formalities on their client’s behalf and, thus, remove a barrier to investment in commercial real estate.

Gross Rental Yield

Gross rental yield expresses rental income as a percentage of the value of the property before taxes and other expenses are deducted. It is calculated as follows:

Gross Rental Yield = (Annual Rental Income/Cost of Property) x 100

Commercial real estate results in an average yield of 7%-7.5%, as opposed to residential real estate which results in an average yield of 4%–5%. This is a popular metric for comparing commercial real estate properties which are going to be rented/ leased out.

Dhruv Saha
Agent & Co Owner

Capital Gain/Total Return on Investment

 Capital gain refers to the profit made by selling a property. It is calculated as follows:

Total Return on Investment = ((Gain from Investment – Expense of Investment)/ Expense of Investment )x 100

This is a popular metric for comparing commercial real estate properties which are going to be sold. Investment in commercial real estate which provides a wide scope for improvement and/or expansion is ideal for earning capital gains.

However, it is important to note that there exists an inverse relationship between gross rental yield and capital gain/total return on investment.

Biman Saha

CEO 

  • Prepare the Property: Enhance the property’s curb appeal and interior presentation to make a positive impression on potential buyers. Address any necessary repairs or upgrades that could increase the property’s attractiveness and value.
  • Engage a Commercial Real Estate Broker: Consider hiring a commercial real estate broker with expertise in your property type and local market. A broker can provide valuable insights, market the property effectively, and negotiate on your behalf to achieve the best possible lease price.

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