There are two basic types of real estate property: commercial and residential. The term “commercial real estate” (CRE) refers to any property primarily used for business purposes. This category may also include properties used as offices or workspaces and assets predominantly used for revenue generation; however, this is not the only form of property that falls under this category. Commercial properties, as opposed to residential ones, can be put to far more extensive use, and offer their owners a much more comprehensive range of advantages.
Most financial decisions are based on solid, logical reasoning and the advice of knowledgeable professionals. As a business owner or investor, one needs to quantify alternative hypotheses, predict, and comprehend crucial financial and business facts to arrive at logical conclusions. It’s essential to have a firm grasp of the scope and profundity of the commercial real estate investment market and even the characteristics of the various types of commercial investment properties.
Types of Commercial Real Estate Properties in Canada
In Canada, it may vary by each state in reference to various cities or municipalities, but at the macro level the commercial real estate comprises a vast spectrum of properties that may be categorized as one of the following:
- Office: The term “office property” refers to a structure or building that primarily houses offices and provides a workspace that can be leased out to various companies to operate their business. The Canadian commercial office market has a periodic tendency, with supply and demand shifting due to elements like the growing labour force and the subsequent rise in the number of individuals in need of office jobs.
- Retail: Retail properties are structures or buildings used mainly for retail purposes. These buildings provide premises to business that sells retail goods to the general public. From modest, local enterprises to massive, national chains, retail establishments come in different shapes and sizes. Big box stores, shopping malls, shopping centres, outlet malls, and other establishments are also considered retail spaces.
- Industrial: Industrial real estate is broadly defined as property utilized to process and manufacture items in a manufacturing environment. It encompasses all land and structures currently used for industrial purposes or suitable for future industrial purposes. Industrial uses that have been around for a long time are typically focused on manufacturing, storage, and transportation, but this has since broadened to include a broader range.
- Multi-residential: Multi-residential refers to any property with more than one unit of residential space, according to real estate terminology. According to traditional classifications, buildings, or constructions with more than four units have traditionally been classed as commercial, while those with fewer than four units have been classified as residential. In smaller markets, smaller rental properties such as duplexes, fourplexes, mid-rise buildings, and townhouses will be more frequent than larger multi-story, multi-floor, or high-rise rental properties in major cities.
- Farm: Farm properties are comprised of lands and facilities constructed on them that are used mainly for agricultural reasons. These agricultural operations could include the cultivation of field-grown crops, raising livestock or poultry, producing milk products, fibre, maple syrup, wood lot, or the raising or production of any other types of crops or animals.
- Recreational: Recreational properties encompass a more comprehensive range of properties that include space dedicated to recreational activities. This could comprise a variety of properties ranging from small housing lodges to huge mixed-use resort-type developments. Additionally, given Canada’s widespread geographical beauty and natural attractions, these could include but are not limited to wilderness camps, ski lodges, bed and breakfast accommodations, trailer parks, theme parks, marinas, and campgrounds, amongst other types of accommodations.
- Institutional: Banks, schools and universities, hospitals, insurance firms, religious or benevolent organizations, as well as these municipal and other government structures, are examples of institutional properties. In this category of commercial properties, the structure’s location is determined based on the type of property in scope. Because these are institutional properties, their construction and other approvals are managed and controlled by the boards or organizations that govern and control the institution.
- Hospitality: As the name implies, the hospitality properties include places and structures for hospitality purposes and cater to vacationing or travelling the general public. These could consist of full service and limited see hospitality properties including but are not limited to Hotels and motels, Lodges and resorts, Boutique and luxury hotels.
- Vacant land: Vacant land means the piece of real estate that has no structure constructed over it and is typically raw. Being raw means the land that has not been improved or transformed in order to be utilized for specific purposes, such as agriculture or ranching. This term is used interchangeably with raw acreage, raw land, and unimproved land. Since empty land falls under the commercial market sector, it is subject to development activities and is therefore sought for new buildings or development.
Canadian Commercial Real Estate Investor Vs Business Owner
There are two categories of stakeholders in commercial real estate: those who invest and rent or lease space. An investor acquires a property or piece of real estate intending to generate money in the form of rent payments from the space by leasing it out. Whereas the users are the ones who rent out these spaces within the commercial building based on their business needs and conduct business. And many times, the user can be a shareholder or an investor. In many instances, this distinction is challenging to discern as an investor might invest in commercial real estate and be a user at the exact times. Moreover, users may have personal aims relating to the utility of a property and an investment plan.
What matters most is to become familiar with the requirements and regulations surrounding commercial real estate, regardless of whether someone is entering the field as an investor or user. Commercial real estate is very different from the residential industry irrespectively of which province or city the investment is made in Canada.
