What Is Commercial Real Estate? Types, Uses and Examples

Commercial real estate includes land and buildings that are primarily used for business, trading, servicing, and other commercial purposes. This can include shops, offices, shopping malls, commercial plazas, warehouses, hotels, business centres, and other developments used to facilitate businesses.

Commercial real estate plays an important role within the economy as businesses will require suitable premises to service their customers, store their products, and run their business.

It is important to understand what commercial real estate is if you are looking to purchase property, own a business, or invest.

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Commercial property is a type of real estate that is used for business-related purposes.

These properties can be used for selling products, providing services, operating offices, managing customers, producing goods, or other business-related purposes.

Examples of commercial properties include shopping malls for retail businesses, office buildings for businesses and professional services, and warehouses.

The properties can be owned and occupied by the business or can be bought by an individual or company and leased to other businesses.

Commercial property can be owned to generate income through rental or leasing. They can also be purchased for development or long-term investment.

The National Association of Real Estate Investment Trusts defines commercial property as a wide range of properties that are used for business purposes. This can include offices, shopping centres, apartments, data centres, warehouses, and hotels.

There are many types of commercial properties. Each type of property will have different characteristics, building requirements, and potential uses depending on its business purpose.

The main types are:

1. Retail Commercial Real Estate

Retail commercial property

Commercial property specifically for businesses that sell goods or services directly to customers.

Enables businesses such as retailers, restaurants, brands, and service providers to have a physical location.

Common examples include:

• Shopping malls.

• Commercial shops.

• Retail outlets.

• Showrooms.

• Shopping plazas.

• Departmental stores.

• Restaurants and cafés.

• Supermarkets.

• Brand outlets.

• Commercial markets.

A good example of retail commercial property is a shopping mall.

A single shop in a commercial market is an example of retail property.

The success of retail property can be influenced by the location, how visible the property is, how accessible it is, the number of customers it gets, parking, and the surrounding businesses.

2. Office Commercial Real Estate

Office commercial real estate is a building or property used primarily for administrative, professional, corporate,e and business purposes.

Companies and organisations use office commercial real estate to manage their day-to-day operations, hold meetings, provide services to clients, ts and house employees.

Common examples include:

• Corporate office buildings.

• Business centers.

• Commercial offices.

• Executive office suites.

• Co-working spaces.

• Software company offices.

• Consultancy offices.

• Financial institution offices.

• Professional service offices.

Office properties can vary from small single units to large multi-storey buildings.

Businesses may rent a space in a commercial plaza or use the entire office tower for their office needs.

Office buildings can have various facilities such as reception areas, meeting rooms, lifts, car parks, security systems, backup power, internet, and shared business facilities.

3. Industrial Commercial Real Estate

Industrial properties are buildings used for manufacturing, production, processing, storage, and distribution.

They are generally not used for customer use like retail properties but are instead used to support business operations and the supply chain.

Examples include:

• Manufacturing facilities.

• Factories.

• Industrial buildings.

• Warehouses.

• Distribution centers.

• Logistics facilities.

• Cold storage facilities.

• Production units.

• Industrial workshops.

For example, a manufacturing company may use an industrial property to manufacture products. Whereas a distribution company may use a warehouse to store products ready to be distributed to retailers.

Industrial properties often have specific requirements such as loading areas, storage space, heavy-duty floors, suitable electrical connections, ventilation and transport links.

In some local planning and property classifications, industrial property can be a separate category. However,r many wider commercial real estate market categories will include industrial/warehouse properties as part of their commercial real estate category.

4. Hospitality Commercial Real Estate

Hospitality commercial real estate includes properties developed to provide accommodation, food, entertainment, and related services to visitors and customers.

These properties serve the tourism, travel, accommodation, and hospitality industries.

Common examples include:

• Hotels.

• Resorts.

• Motels.

• Guesthouses.

• Business hotels.

• Convention centers.

• Holiday accommodation facilities.

• Hospitality developments.

Hotels are one of the most well-known hospitality types of commercial real estate.

They offer a place to stay, as well as other services like dining, meeting rooms, events, leisure, and business.

Depending on their structure and type of business, hospitality real estate can cater for tourists, business people, families, and organisations.

5. Mixed-Use Commercial Real Estate: Mixed-use real estate refers to a development that incorporates two or more different uses of land.

This can include a commercial, residential, office, retail, hotel and leisure development.

Common examples include:

• Buildings with commercial shops on the ground floor and apartments on upper floors.

• Developments combining offices and retail outlets.

• Shopping malls with restaurants and entertainment facilities.

• Projects combining hotels, corporate offices, and commercial spaces.

• Integrated commercial and residential developments.

This type of development may have retail space on the lower floors, office space on the middle floors, and residential units on the upper floors.

This type of development can create a variety of different facilities.

It should be noted that a mixed-use development will not make the whole building commercial. Different sections may be approved for use for different purposes and have different classifications.

6. Special-Purpose Commercial Real Estate

Some commercial premises are specifically designed to accommodate certain needs in activities.

These may not be suitable for typical retail, office, or industrial use.

Examples include:

• Data centers.

• Medical office buildings.

• Private hospitals and clinics.

• Cinema complexes.

• Entertainment centers.

• Self-storage facilities.

• Sports and fitness facilities.

• Exhibition and convention centers.

A data centre will have specialist electrical, cooling, security and technical resources.

A cinema will have screening rooms, seating, audio and customer resources.

These are specific to the business or institution that they are within, and would depend on what market they are in and any local regulations.

7. Commercial Land and Plots

Commercial land is land that has been designated or approved for commercial use.

This can be used to build commercial buildings such as shopping plazas, offices, showrooms, retail stores, hotels, etc.

Examples include:

• Commercial plots in housing societies.

• Main boulevard commercial plots.

• Corner commercial plots.

• Business district plots.

• Commercial land in shopping and retail areas.

• Plots designated for office developments.

However, a commercial site can be left vacant for a period of time. If the site has the correct designation and approvals,s it will be classed as commercial.

The permitted development, height of building, area of building, parking requirements,s and other conditions will depend on the planning regulations and approved development scheme.

Commercial real estate can be found in cities, business districts, shopping areas, industrial zones, and commercial developments.

The following table provides simple examples:

These examples demonstrate that commercial real estate is not limited to shopping malls and shops. It covers a wide range of properties that support different types of economic activity.

Commercial and residential properties are two main types of property. Commercial properties are used for business purposes, while residential properties are used for living.

A shopping plaza will be a commercial property, as it provides space for businesses. A house or residential apartment will be a residential property, as it is primarily used for living.

The following table explains their main differences:

Yes. If the property is rented out by the owner, then rental income can be received. However, this does not necessarily mean that the property has changed from residential to commercial. For example, if someone buys a house and rents it out to a family,y they still have a residential property.

In professional investment circles, large apartment communities are sometimes considered commercial as they are owned, funded,d and assessed as an income-producing investment. For example, Nareit includes apartments in their broad definition of commercial real estate.

Depending on what you are referring to, residential or commercial can depend on the actual use of the land, how the local authorities classify it, and the terminology used in the investment market.

Both commercial and industrial properties are used for economic and business purposes; however,r each has a primary function. Commercial property is generally used for trade, retail, office, and service purposes. Industrial property is primarily used for manufacturing, production, processing, storage, and distribution.

For example:

• A shopping mall is commercial real estate because it provides space for retail businesses.

• A corporate office is commercial real estate because it accommodates professional and administrative operations.

• A factory is industrial real estate because it supports manufacturing.

• A warehouse is an industrial or logistics property because it provides storage and distribution facilities.

In some real estate investment classifications, industrial properties form part of the broader commercial real estate sector. However, local land-use rules may distinguish commercial and industrial areas and regulate them separately.

Commercial real estate is an important part of the built environment because businesses require suitable physical locations to operate.

Its importance extends beyond property ownership and investment.

1. Supports Business Activities

Commercial properties provide the infrastructure businesses need to operate.

Shops allow retailers to serve customers, offices accommodate professional services, and warehouses support storage and distribution.

2. Creates Employment Opportunities

Commercial developments support employment through retail businesses, restaurants, offices, hotels, management companies, maintenance services, and other commercial activities.

3. Supports Economic Development

Commercial buildings and business districts provide spaces for different industries and services.

As economic activity develops, businesses may require additional retail spaces, offices, warehouses, and other commercial facilities.

4. Provides Business Locations

Commercial real estate allows businesses to establish their operations in accessible locations.

A suitable property can help a business reach customers, accommodate employees, manage operations, and connect with suppliers.

5. Offers Property Investment Opportunities

Investment opportunities are available in commercial property through renting out properties, receiving rental income, and having businesses occupy the property. There are a number of factors to consider when investing in commercial property such as location, condition, demand from tenants, operating costs, market conditions and purchase price.

There is no guarantee that you will receive rental income or capital growth from owning commercial property.

The usefulness and commercial potential of a property depend on more than its size and appearance.

Several factors can influence its suitability for business operations and investment.

Location: Accessibility, nearby commercial activity, surrounding development, and customer convenience can affect a property's attractiveness.

Visibility and accessibility: Retail properties often benefit from visible storefronts, convenient entrances, appropriate parking, and pedestrian access.

Property design: Floor layouts, covered area, building condition, elevators, utilities, and available facilities should match the intended commercial activity.

Business demand: The type of businesses operating in the surrounding area and the demand for similar commercial spaces can influence occupancy and rental prospects.

Infrastructure: Electricity, water, internet connectivity, roads, drainage, parking, and other services are important for commercial operations.

Legal status and permitted use: Ownership documents, approved plans, land-use classification, and relevant permissions must be examined before purchasing or developing a property.

Operating costs: Maintenance, utilities, taxes, security, management expenses, and other recurring costs can affect the financial performance of a commercial property.

In Pakistan, it is important to consider land use and approval.

The Government of Punjab has set out in the Land Use Plan Rules 2020 what constitutes commercial use. These rules state that commercial use relates to selling, buying,g and distributing goods and services. The rules also set out the provisions for commercial and industrial land use and conversion.

The Punjab Local Government and Community Development Department has provided guidelines for converting residential property into commercial use and what approval will be required from the local government.

Therefore, do not assume that any property is a legitimate commercial property just because a business is operating from the property or it is stated that it is a commercial property.

Important checks include:

1. Ownership and title documents: Verify the ownership record, transfer history, and any existing legal claims or restrictions.

2. Land-use classification: Confirm that the plot or building is approved for the intended commercial activity.

3. Development approvals: Examine applicable NOCs, approved layout plans, building plans, and other required permissions.

4. Building regulations: Check permitted construction, covered area, building height, parking, and other applicable requirements.

5. Outstanding liabilities: Check relevant property taxes, utility charges, maintenance dues, and other outstanding payments.

6. Physical condition: Inspect the building's structure, utilities, access, safety arrangements, and maintenance requirements.

7. Rental and occupancy arrangements: Review existing tenancy agreements, lease obligations, and occupancy status where applicable.

Requirements can vary between provinces, development authorities, municipal jurisdictions, and private housing schemes. Buyers should verify the applicable requirements with the relevant authority rather than relying on general assumptions.

Commercial properties are properties that can be used to run businesses, trade, services, hospitality, retail, and other such purposes.

This can include shops, offices, shopping malls, plazas, warehouses, hotels, industrial, mixed-use, and plots of land.

Understanding the different categories will assist property buyers, business owners, and investors to understand what the property is used for and if it is suitable for their needs.

The most important thing to know is that commercial properties are mainly used for business purposes, whereas residential properties are mainly used for living. Industrial and other properties may vary depending on what type of classification and rules are being applied.

Understanding what type of commercial property you have, what it can be used for, its location, infrastructure, and legal documents is key when considering any real estate opportunities.

1. What is commercial real estate in simple words?

Commercial real estate refers to land and buildings primarily used for business activities. Examples include shops, offices, shopping malls, commercial plazas, warehouses, hotels, and other business properties.

2. What are the four main types of commercial real estate?

Four widely recognized categories are retail, office, industrial, and hospitality real estate. Other categories include mixed-use developments, special-purpose properties, and commercial land.

3. Is a shopping mall considered commercial real estate?

Yes. A shopping mall is a type of retail commercial real estate because it provides space for shops, restaurants, brands, and other businesses that sell products or offer services to customers.

How Sky Realtors Can Help

Sky Realtors is a real estate consultancy that provides information on real estate.

Understanding different types of real estate is an important part of any property opportunity. Whether you are looking for commercial retail, office space, commercial plots, or large developments, understanding the type of property, where it is located, what it can be used for,r and other considerations will help you make informed decisions.

Sky Realtors will provide you with the information and consultancy you need to understand real estate developments and property opportunities.

If you are looking for information and guidance on property, Sky Realtors can be used as a real estate consultancy.