A common question we receive at Hunt Mortgage Group is “What property types constitute commercial real estate?” To put it simply, commercial real estate properties help generate profit, whether it is through rental income or capital gain.
In a previous blog entry, we identified three basic types of commercial real estate. As a business owner, you owe it to yourself to familiarize yourself with these property types because it will not only improve your chances of obtaining your financing, it will also make the loan application process run more smoothly. Here are 3 more basic forms of commercial real estate.
1. Industrial Properties
Industrial properties are considered commercial real estate because they house operations for a variety of tenants. Industrial properties can be broken down into four types:
- Heavy Manufacturing: These types of properties are heavily customized with machinery, and produce goods and services. They usually require substantial renovation to re-purpose for another tenant.
- Light Assembly: Compared to Heavy Manufacturing, these structures are much simpler. As a result, they can be easily repurposed. These types of properties usually function as storage, product assembly and office space.
- Flex Warehouse: This type of industrial property can be easily repurposed and normally includes a mix of both industrial and office space.
- Bulk Warehouse: These properties are usually very large with a range of 50,000-1,000,000 square feet. Bulk warehouses are utilized for mass distribution of products and require accessibility by trucks entering and exiting highways.
Keep in mind that industrial properties require great expertise due to legal, zoning and environmental issues. In particular, environmental concerns are more prominent because of pollution; as a result, you can expect more inspections and special disclosures when operating industrial properties.
This property type groups together investment properties on undeveloped and rural land for future development. This commercial real estate property can be broken down into three types:
- Greenfield Land: To put it simply, this refers to undeveloped land such as farms or pastures.
- Infill Land: This property type is often located near a city. Unlike Greenfield Land, this property has already been developed, but is now vacant.
- Brownfield Land: These patches of land were previously used for industrial purposes; however, they are now available for re-use. Be sure to keep in mind that these properties could be environmentally impaired due to previous industrial use; as a result, they may face concerns from regulations.
These property types can be independent or part of a chain. Hotel properties can be categorized into three types:
- Full Service: Often located in central business districts and tourists areas, these hotels provide amenities such as room service, on-site restaurants, pools, spas and much more.
- Limited Service: These hotels are smaller and don’t normally provide typical amenities such as room service or on-site restaurants.
- Extended Stay: These hotels have larger rooms, small kitchens, living spaces, closets, and are designed for guests choosing to stay a week or more.
Although these are among the more common commercial real estate properties, there are still other property types that fall into the same category. As a business owner, you owe it to yourself to understand particular features of your property, even more so if you plan on applying for a commercial real estate loan.
The experts at Hunt Mortgage Group are more than willing to help assist you with all of your commercial real estate questions. Contact us today!