Commercial Real Estate

What is 'Commercial Real Estate'

Property that is used solely for business purposes. Examples of commercial real estate include malls, office parks, restaurants, gas stations, convenience stores and office towers. Commercial real estate is one of the three primary types of real estate. The other types are residential real estate, which is used for living purposes; and industrial real estate, which is used for manufacturing and production. The businesses that occupy commercial real estate usually lease the space. An investor usually owns the building and collects rent from each business that operates there.
 

BREAKING DOWN 'Commercial Real Estate'

There are four primary types of commercial real estate leases, each requiring different levels of responsibility from the landlord and the tenant. In addition to rent, a single net lease makes the tenant responsible for paying property taxes; a double-net (NN) lease makes the tenant responsible for paying property taxes and insurance; and a triple-net (NNN) lease makes the tenant responsible for paying property taxes, insurance and maintenance. Under a gross lease, the tenant pays only rent; the landlord pays for the building's property taxes, insurance and maintenance.

Investing in commercial real estate often requires a considerable amount of startup capital and extensive knowledge of the legal, financial and regulatory aspects of owning this type of property. Investors who don't want to deal with these hassles directly can gain exposure to commercial real estate through real estate investment trusts (REITs).
 

RELATED TERMS
  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Single Net Lease

    A commercial real estate lease agreement in which the tenant ...
  3. Double Net Lease

    An agreement in which the tenant is responsible for both property ...
  4. Gross Lease

    A type of commercial lease where the landlord pays for the building's ...
  5. Commercial Real Estate Loan

    definition of a commercial real estate loan
  6. Commercial Property

    Real estate property that is used for business activities. Commercial ...
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RELATED FAQS
  1. What kinds of real estate transactions use triple net (NNN) leases?

    Learn how a net-net-net or triple net lease works and why it is popular in commercial real estate transactions. It is also ... Read Answer >>
  2. How much of the global economy is comprised of the real estate sector?

    Find out how much of the global economy consists of the real estate sector, including output from commercial and residential ... Read Answer >>
  3. What are the differences between single, double and triple-net leases?

    Learn the ins and outs of net lease agreements, including the key differences between single net, double net and triple net ... Read Answer >>
  4. What are the differences between investing in real estate and stocks?

    Invest in real estate by purchasing physical property or buildings, or invest in stocks by buying a claim to a company and ... Read Answer >>
  5. What are the main segments of the real estate sector?

    Identify the three primary segments of the real estate sector and the metrics used by investors and analysts to gauge the ... Read Answer >>
  6. How can I make equity investments in real estate?

    Invest in real estate equity through buying and selling real property or through other more liquid investments like real ... Read Answer >>
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