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Commercial Real Estate Investments
Commercial real estate is one of the three main types of real estate, along with residential and industrial. As its name implies, commercial real estate is used in commerce (residential real estate is used for living purposes, while industrial real estate is used for the manufacture and production of goods). While some businesses own the buildings they occupy, the more typical scenario is that an investor owns the building and collects rent from each business that operates there. While residential real estate lease rates may be quoted in an annual sum or a monthly rent, commercial real estate is customarily quoted in annual rental dollars per square foot.
Commercial Real Estate Classifications
Commercial real estate is categorized into different classes. Office space, for example, is divided into one of three classes: class A, class B or class C.
Class A represents the best buildings in terms of aesthetics, age, quality of infrastructure and location.
Class B buildings are usually older and not as competitive price-wise as Class A buildings. These buildings are often targeted by investors for restoration.
Class C buildings are the oldest, usually over 20 years of age, located in less attractive areas and in need of maintenance.