Commercial Real Estate

AAA

DEFINITION of '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.
 

INVESTOPEDIA EXPLAINS '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. Certified Commercial Investment ...

    A professional designation awarded by the Certified Commercial ...
  2. Home Inspection

    An examination of a real estate property's condition, usually ...
  3. Commercial Investment

    An investment in a for-profit enterprise involved in the buying ...
  4. Shell Lease

    A commercial lease in which a tenant rents a property with an ...
  5. Builders Risk Coverage Form

    An insurance policy that covers residential and commercial structures ...
  6. Co-Tenancy Clause

    A common clause in retail lease contracts that allows tenants ...
RELATED FAQS
  1. How much of an institutional pension fund's portfolio is typically investing in real ...

    It is estimated that institutional pension funds in the United States typically have about 5% to 10% of their assets allocated ... Read Full Answer >>
  2. What are the main segments of the real estate sector?

    The main segments of the real estate sector are residential real estate, commercial real estate and industrial real estate. ... Read Full Answer >>
  3. What does 'froth' mean in terms of the real estate market?

    On May 20, 2005, while addressing the Economic Club of New York, the now former Federal Reserve chairman Alan Greenspan commented ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  5. What is the difference between adjusted and regular funds from operations?

    While regular funds from operations measures the cash flow generated by the operations of a real estate investment trust ... Read Full Answer >>
  6. How can I use the funds from operations to total debt ratio to assess risk?

    The funds from operations (FFO) to total debt ratio is used in fundamental analysis to determine a company's financial risk. ... Read Full Answer >>
Related Articles
  1. Home & Auto

    7 Steps To A Hot Commercial Real Estate Deal

    For savvy real estate investors, times of lower prices reveal investment opportunity.
  2. Home & Auto

    How To Analyze Real Estate Investment Trusts

    REITs are much like dividend-paying companies, but analyzing them requires consideration of the accounting treatment of property.
  3. Home & Auto

    10 Habits Of Highly Effective Real Estate Investors

    The best real estate investors all share these traits and practices.
  4. Home & Auto

    How To Assess A Real Estate Investment Trust (REIT)

    Find out why funds from operations is a superior measure of REIT performance.
  5. Home & Auto

    Real Estate Vs. Stocks: Which One's Right For You?

    There are ups and downs for both real estate and stock investments, so before diving in, know the differences between the two.
  6. Entrepreneurship

    Find Fortune In Commercial Real Estate

    Investing in big buildings means big money - and bigger risks.
  7. Options & Futures

    Defeasance Reduces Commercial Real Estate Fees

    Try this alternative to short-term variable-rate financing when using leverage to buy property.
  8. Bonds & Fixed Income

    The Impact Of Interest Rates On Real Estate Investment Trusts

    REITs are high-yield investments, but do they have an inverse relationship with interest rates? Find out here.
  9. Mutual Funds & ETFs

    ETF Analysis: ProShares Short MidCap400

    Discover the benefits and drawbacks of the ProShares Short MidCap400 ETF, and learn which investors are best suited for the fund's investment strategy.
  10. Mutual Funds & ETFs

    Top 3 ETFs For Investing in Brazil

    Discover information and analysis of some of the most popular and best performing exchange-traded funds that offer investors exposure to Brazil.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!