What to Know About Commercial Real Estate

Commercial Real Estate agents hold a piece of paper
How much do you know about Commercial Real Estate? We're breaking down the ABC's of CRE.

What is Commercial Real Estate? 

Commercial Real Estate (CRE) refers to property used for business operations and generating income through leasing arrangements. This type of commercial property ranges from single storefronts to sprawling shopping centers—all designed with the same purpose: to create profitable opportunities for real estate investors.

The value of a CRE property depends on the following:

  • Location
  • Access to resources like energy sources or transportation networks
  • Construction and maintenance standards
  • Local market environment
  • Zone restrictions
  • Capital readily available to finance initiatives
  • Overall state of the economy

Commercial real estate has become increasingly popular in recent years due to its potential to generate high investment returns and provide unique opportunities for business owners.

The US commercial construction sector has seen remarkable growth since 2010, and in 2021 alone, an incredible 91 billion dollars was invested in commercial real estate building.

The coronavirus pandemic has significantly impacted the commercial property sector, with the growth of e-commerce and hybrid working models becoming commonplace. Unsurprisingly, there have been dramatic changes in both demand and supply within this market.

So while offices have long been dominant in the commercial real estate market, this shift has made industrial properties more prominent. E-commerce has boosted the demand for industrial spaces.

In this article, we’ll go over the different types of commercial real estate and how you can invest in it yourself.

Types of Commercial Real Estate

There are various types of commercial real estate. The most common ones include office space, industrial, retail, hospitality, and multi-family rentals.

Now let’s dive deep into each.

Office Space

Office buildings offer a place for business and professional activity. One-person cubicles and structures with many storieeys and hundreds of users can both be used as commercial space.

Office spaces can be classified into the following:

  • Class A buildings have superior aesthetics, prime infrastructure, unique locations, and high accessibility. They’re also often high-rise and recently built—typically over the last five to ten years.
  • Class B buildings are usually cheaper than their Class A counterparts and often attract investors after restorations.
  • Class C buildings are the oldest, generally constructed more than two decades ago, and situated in less desirable areas. These structures need more renovation or restoration work as well.

Despite the average 0.4% annual decline of the market size of the US commercial leasing industry between 2018 and 2023, it’s expected to increase by 2.4% this year.

Industrial Use

Industrial real estate is often used for manufacturing, large-scale warehousing, and other mixed-use or special purposes. It differs from commercial real estate as it’s typically zoned for specific industrial purposes, such as heavy industry and power plants.

The size of industrial properties can vary greatly. Some may be only a few acres or less, while others may cover hundreds or thousands of acres.

Industrial buildings are essential for many aspects of the economy to function:

  • Warehouses provide critical storage space for businesses to store their goods, while factories produce the products we rely on daily.
  • Industrial parks often contain multiple buildings hosting different companies, creating an efficient business and operating environment.
  • Large-scale projects such as power plants and oil refineries require substantial land to construct efficiently.

For anyone looking to invest in industrial real estate, several criteria should be considered:

  • Location. Depending on your needs, you’ll want to find an area that can provide easy access via highways or railroads, along with zoning laws that are conducive to your goals (such as allowing you to expand if desired).
  • Reliable utilities. This includes water, electricity, sewerage, etc., plus any permits necessary if applicable (such as air pollution control permits)
  • Applicable taxes. Including property taxes, these will vary by state, so researching your local laws beforehand is essential when investing in industrial real estate.


Retail real estate is one of the most popular and profitable commercial property types. It includes the following establishments where you typically shop and pay for goods and services:

  • Shopping centers
  • Malls
  • Department stores
  • Clothing shops
  • Restaurants
  • Bars
  • Cafes
  • Hair salons and spas
  • Laundromats
  • Health and fitness centers, i.e., gyms and yoga studios
  • Any other establishments where people spend money

Owning a retail space gives investors more control over tenants’ lease terms than other real estate investments.

Retailers typically require longer leases than office tenants, which provides them with a predictable cash flow over an extended period—making it an attractive option for investors.


Some consider hospitality as a subset of retail real estate. Hospitality includes:

  • Hotels and motels
  • Resorts
  • Casinos
  • Convention centers and event spaces

Hospitality real estate has become increasingly popular recently, with investors looking for more stable investments and higher returns.

The hospitality industry is resilient to economic downturns, as it tends to hold up better than other commercial markets during recessions.

Multi-Family Rentals

Multi-family rental properties are buildings with multiple residential units, often more than just two.

Multi-family rentals may range from small, single-family duplexes and triplexes to large complexes with hundredsdozens of units. These buildings include apartment complexes, townhouses, assisted living, and other housing complexes.

The potential for profit in multi-family housing is significant. Investors can earn greater returns because they can charge a higher rent per square foot and collect rental income from multiple tenants in one building.

In addition, these apartment buildings and other multi-family properties can be more cost-efficient to maintain due to their size and central location. They provide an opportunity for investors to achieve economies of scale by:

  • Taking advantage of bulk discounts from suppliers
  • Reducing costs associated with maintenance and repair services
  • Improving efficiency by focusing on one area instead of many different locations as with individual properties

Multi-family rental properties offer other benefits, such as increased liquidity. The asset can be sold quickly or refinanced if necessary. Financing is more accessible than other investment properties due to the long-term commitment of renters who pay their rent on time.

The value of multi-family real estate also appreciates with market conditions or improvements made by the owner/investor over time.

How Do You Invest in Commercial Real Estate?

Investing in commercial real estate involves purchasing a property to generate income by leasing it out or developing it into something else entirely.

CRE can offer higher returns on investments than other forms of investing and asset classes, like residential real estate, the stock market, and bonds. They typically provide a more stable cash flow over time with less volatility associated with market fluctuations.

Additionally, commercial real estate properties tend to have higher intrinsic values than comparable residential properties due to their larger size. They often come equipped with amenities like parking lots, loading docks, and storage facilities—making them more valuable than similarly sized residential properties. 

There are two ways to invest in CRE: indirect and direct. direct and indirect.

Indirect Investment Through REIT

REITs—or Real Estate Investment Trusts—are a type of security that owns, finances, manages and operates commercial real estate and makes money primarily through rent collected from their properties.

This type of investment is generally less risky than directly investing in a property, as it requires less cash upfront, and the investor’s risk is spread across multiple properties within the trust.

However, there are still risks associated with investing in REITs due to market fluctuations, which can cause their share price to drop suddenly and unexpectedly.

Direct Investment Through Real Estate Property

Direct commercial real estate investing may attract investors seeking higher profits with greater potential risk.

By buying a property outright or taking out a loan to purchase one, you can become a building owner that you can lease out to a business or other income-generating tenant.

Many investors buy properties and flip them after a certain period. Some hold them as long-term assets that can appreciate over time. 

This direct investment has advantages as it can provide more significant returns once the property reaches its full potential.

However, it also carries significantly more risk than purchasing REIT shares. You’ll likely have to commit more capital upfront and take on greater responsibility for management and upkeep.

Blooma Makes CRE Lending Simple

For all types of CRE investments, the lending process today can be time consuming and costly. At Blooma, we make commercial real estate lending simple and fast. Blooma.ai is a revolutionary platform that brings much-needed automation and efficiency to CRE lending.

Blooma’s AI platform enables lenders to quickly review loan applications and make informed decisions in significantly less time. 

For any lender looking for an easy way to streamline their CRE loan process while minimizing the risk involved, there is no better choice than Blooma.ai.

Discover how Blooma can make CRE simple for you.

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