Commercial Property Asset Types

…different asset types fullfil different needs, this needs to be determined before you start your search…

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INDUSTRIAL

RETAIL

OFFICE

SPECIALITY

Commercial property is built and used solely for business purposes. There are four main types of commercial property: retail, office, industrial and speciality.

Industrial

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Industrial property is one of the four main asset classes of commercial property and is used predomintaely for is used for industrial purposes. Industrial properties can generally be broken down into three sizes: small, medium and large (some extremely large). They can also be classified into 3 broad categories:

Manufacturing
Research and Development
Warehousing or Distribution

Small industrial sites include single or double-storey buildings zoned specifically for industrial use. They often have a good combination of flexible interior space, with a mix of warehouse and office space. These style of spaces are used by small businesses such as storage/back-end warehousing, automotive, repair, research labs, trades and other start-up style businesses.

Mid-sized industrial properties include medium to large warehouses and factories that are designed to manufacture or store goods. They include distribution companies such as freight/third party logistics, small manufacturing/repair businesses, national retail chains and so on.

At the big end of town you have the large (to extreme) sized industrial spaces that are used for logistics and distribution centres that hold and then distribute finished goods to stores and/or directly to customers. Companies that require this level of space are your Amazon’s, Woolworths, Coles etc.

What are the benefits of investing in industrial retail estate?
Investing in industrial real estate can yield significant returns for the savvy investor.

Retail

Retail commercial real estate is one of the largest and most diverse sectors of the commercial property market and predominately used exclusively to market and sell consumer goods and services. The size of retail real estate ranges from huge shopping centres like Westfields and Bunnings, to the local suburban shopping strip and down to individual stores and pop-up/hole-in-the-wall small outlets

Retail stores are populated by a vast range of business types including everything from supermarkets, dry-cleaners, cafes & restaurants, florists, pharmacies, bike shops, jewellers, fashion stores and so on.

Large Format Retail
The large format retail sector is typically represented by homemaker style tenants as well as tenants obviously represented in traditional department stores. This sector now represents a staggering 34% of all retail floor space with many of these properties being free-standing or part of a larger complex.

Retail property can offer investors great opportunities for solid returns, but you need to be wary with your selection. There are pitfalls to navigate.

Office

Office real estate is commercial property that is set aside for purely for business and can be found in single buildings, multi-level suburban buildings, to larger business parks & precincts all the way up to large CBD office towers.

Offices require desk/workstation space, meeting rooms, offices, reception areas, storage and facilities such as kitchens and parking. They also require at times a high level of IT infrastructure and security needs.

The types of businesses that occupy office real estate also is vast ranging from businesses like finance, insurance, management, administration, legal and corporate affairs.

Office space is one of the most popular commercial property classes to invest in. And there are good reasons for this, investing in office space can be a lucrative business.

Office space is popular with investors, a well-located and maintained office with secure tenants can provide investors with excellent returns.

Special Purpose

Most other types of commercial property fall into the speciality or the special purpose category.
A special purpose property (sometimes called a single purpose entity) is a property that is appropriate for one use or limited use: a building that cannot be converted to another use without a large capital investment.

This can include businesses such as car washes, service stations, self storage, theme parks, nursing homes, bowling alleys, theatres, hotels (pubs), funeral homes, churches and even marinas.

The best tip for buying any commercial property is to look at how easily it would be to re-lease i.e., make sure you plan for a future vacancy with your asset selection.

But wait, there's more...

The above four categories are the main ones but there are others like unit blocks, land, multifamily, boarding houses, large-format retail and mixed use properties. Some industry comentators suggest they fit the Special Purpose or in the Retail categories and others don’t. We’ve described them below for yuou

Unit Blocks
Block of more than 4 units on one title can be classed as a commercial property. For years banks have treated blocks of 4 or more units on one title as qualifying for a commercial loan, which increases the minimum deposit to approximately 30%. The yields are also higher than standard single occupancy residential properties given the multiple incomes involved

Boarding Houses
A boarding house is defined as a house which individual rooms that are let out to short term tenants. They normally share common areas such as kitchens, living rooms and bathrooms. Note however, this classification does not include backpackers accommodation, group homes, hotels or motels, senior housing or serviced apartments.
Given the multi income nature of the investment, and the transient nature of the tenants, extensive and constant managament is required.

Land
Land zoned for commercial property typically falls into three categories:
Greenfield Land – Greenfield land refers to completely undeveloped land such as a farm, bush or pasture.
Infill Land – Infill land is located in a city has has usually already been developed, but is now vacant.
Brownfield Land – Brownfields are parcels of land previously used for industrial or commercial purposes, but are now available for re-use. These properties are generally environmentally impaired.

Mixed use
Generally these types of propperties have a commercial front (or ground level) with residential at the back in some older buildings or above. The residential property is normally seperate to the commercial premises and in most cases able to be rented out creating a multi-income scenario.