Commercial real estate encompasses a wide array of property types, including office buildings, apartment properties, malls, shopping centers, warehouses, distribution facilities, and research-and-development or research-laboratory properties. Buildings made up of a mix of office and industrial space are called “flex” properties. If 50% or more is office, the property is called “office/flex.” If less than 50% is office, it is called “industrial/flex.” Some flex properties include research-and-development or laboratory space.
Most investors also consider hotels to be commercial real estate, but some look at hotels as operating businesses, and lump them in with a subset of properties that include assisted-living facilities and casinos.
With the possible exception of raw land, all commercial properties, including the “niche” properties described below, have one trait in common: They are capable of producing income, either in the form of capital gains or rental income.
Niche Property Types
In recent years, an increasing number of investors have begun investing in so-called niche property types. These include specialty properties such as apartment complexes specifically for college or university students, age-restricted apartment complexes for older residents, self-storage facilities, and office buildings that cater to doctors and other medical-related tenants.
Other investors acquire raw land, with the goal of obtaining the appropriate permits so that, within zoning regulations, properties could be built on it.
Some investors are beginning to look at infrastructure as a possible niche real estate investment. Currently, infrastructure is often classified as a subset of private equity investing. Some companies invest in “social infrastructure” (prisons, courts, hospitals, municipal garages, municipal buildings and schools) or “transportation infrastructure” (airports, rail stations, ports, toll roads, bridges and tunnels) – areas that have some crossover with real estate. For example, there are already real estate investment trusts that invest in prisons, and investment funds that invest in hospitals or garages. And most airports and rail stations have a retail/restaurant component.