Commercial Real Estate is a great field and unlike other great industries in America it hasn’t been monopolized or ologopolized…yet. If you are looking to develop an apartment complex or build a skyscraper or just have a storage space, this is the right place for you. Because this is a vast field, we’ll discuss the different asset types and then get into whether you should purchase, lease, or invest.
The main asset classes are multifamily (Apartments), Retail, Office & Hospitality. I know you’re thinking that there are other asset types like Industrial, Storage, and Healthcare, but those are more specialized sub classes of the main classes (storage works very similarly to Retail except its really simple).
Multifamily was my first love in Commercial Real Estate because it was all I knew for a really long time. In the Multifamily asset class we are monitoring “doors”, or units, and Price/Sq. Ft and Price/Door when we are looking to determine how much revenue to expect when considering line items such as Operating Expenses or OPEX and Capital Expenses or CAPEX.
Retail is not only the shopping mall like retail stores like Macy’s or H&M but also the Apple Store, 24 Hour Fitness, and Walgreen’s. This asset class looks at metrics like Profit/Sq. Ft., NNN, Base Rent, and Rent Stops. When we are looking into Retail we are looking at those businesses that offer a service and the building serves as a place for customers to interact with salespeople or the actual business.
Office originally sounded boring to me because who would think that there is anything special about a workplace. This was until I was exposed to the myriad of well-designed architecture and engineering that went into some of the world’s best Office Spaces. There are not only offices that stand tall, but offices that twist & bend, offices that blur the lines of reality, and offices that push the edge of technology. Office and retail commercial real estate do use
Hospitality sounds like it should be discussing Hospitals but it is in fact in reference to Hotels. Hotels operate like business and they are the most unique of the asset classes. Each day, a hotel is looking to meet their revenue goals. They use metrics like RevPar and ARR, which helps Hospitality owners know how their prices compare with their competitors. The objective of course is to have the highest occupancy rates and the highest rates. Hospitality often resorts to consumer websites such as my favorite, Hotwire, or Expedia because they get to maintain occupancy at their hotels.
Often times, people looking to get into Commercial Real Estate ask questions like “How much does an office building cost?” or “How can I buy Commercial Real Estate with no money down?” But those are the wrong questions. The questions someone getting started in Commercial Real Estate should ask is “What are my goals in Commercial Real Estate” or “How much time can I devote to learning a new field?” While it is true that you can buy Commercial Space and then rent it out, it is also true that you can rent commercial space and then sublease it or that you can be a financial partner in a commercial deal and not have to expend any of your personal time to achieve a return.
Are you looking to get in Commercial Real Estate or purchase, lease, or invest in Commercial Real Estate. Call me at 713-597-2006 and set up a free 15 minute consultation to determine what the best asset type and transaction type is for you.