Commercial Real Estate Market Metrics

Investors in commercial real estate often have a more complex set of metrics to navigate than those who purchase residential rental properties. These metrics may include complicated lease terms and higher property valuations.

The types of commercial property differ in purpose and usage, and they include office buildings, retail spaces like shopping malls, industrial complexes and apartment complexes or “multifamily properties.” Commercial real estate also includes power centers and brownfields. Contact Las Vegas Commercial Real Estate now!

Power centers are retail property types that are designed to attract large retailers like Walmart, Best Buy, and Lowe’s. These big-name tenants are often found clustered together, but with enough space between them to allow for smaller local retailers and restaurants. According to ICSC, there are 2,258 power centers across the country.

Generally, power centers are located in suburban areas and serve a trade area within five to ten miles. The design, layout, and tenant mix of each center is carefully crafted to fit the needs of the market. The goal is to bring in a large quantity of shoppers, thereby boosting the sales volume for all of the tenants.

Factory outlet malls are another popular type of power center. Much smaller than a traditional mall, these property types typically range in size from 50,000 -400,000 square feet and feature a trademark outdoor layout. Unlike traditional malls, they are almost always anchored by category-dominant anchors such as home improvement stores (Home Depot and Lowes), discount department stores, warehouse clubs, and off-price stores.

Other popular types of power centers include strip malls and shopping centers. Strip malls are usually smaller and are occupied by a mix of big-box and specialty retailers. Larger shopping centers can be found in high-traffic locations, and they tend to be anchored by larger department stores.

The final major type of commercial real estate is office buildings, which account for one of the four primary CRE asset classes. Depending on the property’s location, its size, and its amenities, these buildings can be highly lucrative. However, waning in-office attendance has slowed growth for many investors. As interest rates remain elevated, these investors must carefully weigh their options.

Retail Parks

Retail parks and malls occupy a distinct place in the commercial real estate market. They’re often “anchored” by large department stores or other big-name tenants that help draw shoppers in. Then, apparel merchandisers, convenience shops and other retailers fill the rest of the space, providing a diverse mix of revenue streams for investors and exciting shopping experiences for shoppers.

These CRE spaces vary in size, from small strips of stores with apartments on top to massive mid-rise complexes that occupy entire city blocks. But they have one thing in common: They generate rental income for the property owner, similar to residential properties that earn rent from individual homeowners.

As consumers shift their habits and economic conditions change, retail park locations are reinventing themselves. Many are making upgrades to increase customer dwell time and provide more leisure-focused entertainment. They’re also bringing in new tenants such as cinemas, restaurants and drive-throughs to boost footfall.

While e-commerce is creating challenges for traditional brick and mortar stores, retail parks are experiencing relative stability. As a result, they’re an attractive investment option for those looking for a steady source of rental income and the potential for capital appreciation.

While the stock of retail parks has remained relatively stable, revenues per square meter have been growing faster than those at other retail locations. This is especially true for retail parks focused on home-related goods, such as DIY and garden centres.

Multifamily Properties

As the name suggests, multifamily properties feature more than one unit. The smallest scale of this property type includes duplexes, triplexes and quadruples (known as two-families in some parts of the country), with larger apartments considered to be commercial real estate if they have five or more units. Multifamily property classification is often based on the intent of the owner and local zoning laws, as well as the size of the buildings and how they’re utilized.

Investors who are new to the rental property game may want to start with smaller, residential multifamily properties. This asset class is financed by banks using residential mortgages, making it a great entry point for those who are new to the market and want to test the waters before investing in large apartment complexes or other commercial properties. It also supports a strategy known as house hacking, where the investor will live in one of the housing units and rent out the others, which can significantly increase monthly cash flow.

On the other hand, multifamily commercial real estate is a lucrative investment because of its steady, consistent cash flow and its ability to be scaled as the owner sees fit. It’s a highly profitable asset that can be sold or refinanced with relative ease, and the demand for it is consistently high.

There are many types of commercial real estate, including office, retail, industrial and hospitality. Each type has its own unique advantages and caters to a particular clientele. For example, office space is designated for business operations – think medical and law offices – while retail real estate focuses on selling products or services to consumers like strip malls and regional shopping centers.

Infill Land

Infill land is a property that exists within an already developed area. Infill development takes advantage of existing infrastructure and allows for environmentally sustainable urban growth. It can include building on empty or underutilized land as well as the redevelopment of a brownfield, a site that’s contaminated from previous uses.

Commercial infill properties offer a unique opportunity to invest in high-performing real estate assets while limiting environmental impacts. They also help to revitalize and grow communities by breathing new life into vacant buildings, lots and unused spaces. In addition, infill developments can be built to serve specific markets, such as student housing or senior living, which often requires more specialized construction and services.

Residential infill investments can be a great option for investors seeking to maximize their ROI and build wealth in the real estate market. The US housing shortage and rising home prices are driving demand for new construction and pushing residential property values up. However, it’s important for investors to carefully research and evaluate residential infill opportunities before making any purchases.

Multifamily real estate includes apartments, townhomes and condominiums that are rented out to tenants. It’s a popular investment choice because it offers an ongoing income stream and is less vulnerable to fluctuations in the economy than other commercial properties. Multifamily real estate also offers investors the ability to diversify their portfolio by investing in different geographies, property types and sizes.

Investors can benefit from the flexibility of multifamily real estate by focusing on high-demand areas that have the potential to increase in value over time, such as university towns and suburban locations. Additionally, investors can maximize their returns by targeting multifamily properties with modern amenities and features that meet tenant demand.

Brownfields

While brownfields can present challenges, they can also be opportunities for developers. The redevelopment of brownfields can bring economic growth and jobs to a community while transforming underutilized properties into viable commercial real estate projects. It can also improve environmental quality, foster sustainable development and alleviate social inequality caused by the disproportionately high number of brownfields in low-income neighborhoods.

To redevelop a brownfield, communities must first evaluate its potential for contamination and remediation. This is done by conducting an Environmental Site Assessment (ESA) to identify any contamination and assess its severity.

Once a property is determined to be potentially contaminated, a community may seek grants and loans to help fund environmental cleanup or other redevelopment costs. This funding can be a crucial step to moving forward with redevelopment and removing liability concerns.

In addition to funding, local governments can play an important role in brownfield redevelopment by offering tax incentives and regulatory guidance. Lastly, the support of residents and business owners is critical to the success of brownfield projects.

Redeveloping a brownfield can be a complex process. It is important to have an experienced team of professionals, including engineers, environmental consultants and lawyers, working on the project. These individuals can help to identify potential contaminants, assess their severity and develop a plan for the property’s reuse.

While the risk of exposure to environmental toxins can be a deterrent for many prospective developers, there are several ways that brownfield sites can be redeveloped and used for commercial purposes. Some developers are now pursuing ambitious mixed-use projects on brownfields in urban centers to great success. They have found that the cost savings and return on investment of reusing an existing infrastructure, such as roads and utilities, can make brownfields a valuable asset.