> Commercial Use

Commercial Use

Commercial use is a property zoned for commercial or business-related use only and has no residential facilities. Commercial properties include offices, industrial activities, retail properties, hotels, mixed-use properties, and special-purpose properties. 

Office commercial use properties are classified as suburban or urban and can be multi- or single-tenanted. They are also classified by the Building Owners and Managers Association (BOMA) as Class A, B, or C.  Class A are premier properties with above-average rents. Class B is fair to good with average rents. Class C offers below-average rents and unfavorable locations.

Industrial properties range from heavy manufacturing to light assembly to warehouses. Retail properties include strip malls, shopping centers, community retail centers, and regional malls. Hotels range from full-service hotels in tourist areas or central business districts to limited-service hotels and extended-stay hotels. Mixed-use properties include retail or restaurant properties on the first floor and offices or residences on the upper floors. Special-purpose properties include stadiums, theaters, amusement parks, etc. 

Investment returns from commercial use properties are chiefly from rental income, although there can also be property appreciation when sold. The advantage of commercial property investment is primarily from cash flow stability with long-term business tenants. It’s also a stable income hedge against other investments, including the stock market. The downside is a high capital investment, greater regulation, and an asset that is tough to sell on short notice.