The Four Food Groups
Posted by Jordan Crouch on October 30, 2007
There are four main types of commercial real estate, often called the Four Food Groups. These are Office, Industrial, Retail, and Multifamily. In this article, we’ll look at examples of each type as well as touch on other types of commercial real estate.
Office – Office properties can range from the skyscraper downtown to the small two story suburban office building near my house to everything in between. There are many subcategories of office properties including medical, single/multi tenant, owner-user, telecommunications, credit (usually single tenant that’s stock is traded; ie Microsoft, Boeing, Starbucks), and even office condominiums. Office properties are usually found in central business districts (CBD), business parks, and near lots of housing.
Industrial – Industrial properties are what you would expect. One story concrete/cinder block buildings with minimal office build-out, tall ceilings, large bay doors and few amenities. As with office, there are many different types of industrial buildings including cold storage, warehouse, manufacturing, single/multi-tenant, owner-occupied, flex (usually consisting of a larger portion of the building being office), and distribution. These properties are usually away from the CBD and neighborhoods; near wide streets for the semi-trucks to maneuver and with close access to ports, railroads, and major freeways.
Retail – Retail properties can range from a big box store (Wal-Mart, Costco, Best Buy) to a small restaurant, bank branch or 7-11 type mini-mart. Also included in the retail category are shopping malls, grocery stores, and strip retail. Typically any business that sells directly to its customers can be considered retail. With such a broad definition and so many diverse types, retail can be found almost anywhere.
Multifamily – Also called apartments, this category of commercial real estate is probably the most familiar to everyone because at one time or another everyone will live in an apartment building. Like the other Food Groups, this one comes in different shapes and sizes. There are garden style (multiple 2-3 story buildings spread out around a central clubhouse, usually in suburban areas), mid/high rise (mid rise are 3 to 5 stories, high rise are 6+ stories, both are found in densely populated areas), affordable (a government agency reimburses a portion of the rent), student (usually on or near a college campus), and military (exclusively or semi-exclusively used by a branch of the military, usually near a base).
Other Types – Besides the four food groups, there are many other types of commercial real estate. These include hotels, self storage, senior housing, marinas, hospitals, mobile home parks, and mixed use. Mixed Use combines two different property types in one property. The most ubiquitous are multifamily buildings with retail/office on the first floor but there are other successful combinations as well.
As always, if you disagree or have a question, please leave a comment.