What exactly is commercial property?
It seems like a simple question, but you’d be surprised how many people — including some who are actively investing — don’t have a clear understanding of what falls under the commercial real estate umbrella.
I’m Matt Bingaman, Commercial Real Estate Advisor, and I believe that building wealth through CRE starts with understanding the fundamentals. So let’s break it down.
The Definition
Commercial property (also called commercial real estate or CRE) is any property that is used primarily for business purposes or to generate income. This includes properties where businesses operate, goods are stored or distributed, or tenants pay rent to live (in the case of larger multifamily buildings).
The key distinction from residential real estate is intent and use: if the primary purpose is business activity or income generation, it’s commercial.
The Major Types of Commercial Property
Commercial real estate is broadly categorized into several major property types:
1. Office
Office properties range from single-story suburban buildings to downtown high-rise towers. They’re further classified by quality:
- Class A — Premium buildings with top finishes, locations, and amenities
- Class B — Good quality but not the newest or most prestigious
- Class C — Older, functional buildings often in less desirable locations
2. Retail
Retail properties include anywhere consumers go to shop or access services:
- Shopping malls
- Strip centers
- Stand-alone retail buildings (like a bank or restaurant)
- Grocery-anchored centers
- Lifestyle and power centers
3. Industrial
Industrial properties support manufacturing, storage, and distribution:
- Warehouses and distribution centers
- Manufacturing facilities
- Flex space (combination of office and warehouse)
- Cold storage facilities
- Data centers (increasingly classified here)
4. Multifamily
While a single-family rental is technically residential, apartment buildings with 5+ units are classified as commercial real estate. This includes:
- Garden-style apartments
- Mid-rise and high-rise apartment buildings
- Student housing
- Senior living facilities
5. Hospitality
Hotels, motels, resorts, and extended-stay properties fall under this category.
6. Special Purpose
These are properties designed for a specific use that doesn’t fit neatly into the other categories:
- Car washes
- Self-storage facilities
- Churches and religious facilities
- Gas stations
- Marinas
- Entertainment venues
Why Commercial Property Matters
Here’s why I’ve built my career around commercial real estate — and why I believe it’s one of the most powerful wealth-building vehicles available:
Multiple Income Streams
A single commercial property can have multiple tenants, each paying rent. A 10-unit strip center generates 10 separate income streams, reducing your risk compared to a single-tenant property or a single-family rental.
Value Based on Income
Unlike residential properties — which are valued based on comparable sales — commercial properties are valued based on the income they produce. This means you can directly increase the value of your property by increasing revenue or reducing expenses. That level of control doesn’t exist in residential real estate.
Professional Tenants
Your tenants are businesses. They have reputations to maintain, customers to serve, and leases they take seriously. In my experience, commercial tenants tend to take better care of properties and are more motivated to honor lease obligations.
Favorable Lease Structures
Commercial leases are far more flexible and landlord-friendly than residential leases. You can negotiate rent escalations, expense pass-throughs, percentage rent, and long-term commitments that create predictable cash flow for years.
Tax Advantages
Commercial real estate offers significant tax benefits, including:
- Depreciation — You can deduct the cost of the building over its useful life
- Cost segregation — Accelerates depreciation on certain building components
- 1031 exchanges — Defer capital gains taxes when you sell and reinvest
- Mortgage interest deductions — Deduct interest paid on commercial loans
- Pass-through deductions — Potential 20% deduction on qualified business income
Common Misconceptions
Let me clear up a few things I hear regularly:
“Commercial real estate is only for big corporations.” Not true. Individual investors, small business owners, and everyday people invest in commercial property every day. You don’t need millions to get started.
“It’s too complicated.” It’s different from residential — but that’s why you work with an advisor. The fundamentals are learnable, and the right guidance makes all the difference.
“It’s too risky.” Every investment carries risk. But commercial real estate, when approached with proper due diligence and professional guidance, offers some of the most predictable and controllable returns available in any asset class.
Getting Started in Commercial Real Estate
If you’re new to CRE, here’s my recommended path:
- Educate yourself — Read, listen to podcasts, attend local CRE events
- Define your goals — Are you looking for cash flow, appreciation, or a place to operate your business?
- Build your team — You need a CRE advisor (that’s me), a commercial lender, a real estate attorney, and a CPA who understands commercial property
- Start with what you understand — If you know retail, look at retail. If you know warehouses, start there
- Take action — Analysis paralysis is the biggest killer of CRE ambitions
Let Me Be Your Guide
Commercial real estate can be transformative — financially and professionally. But navigating it alone is a recipe for costly mistakes. I’ve helped clients across every property type and experience level make smart, confident CRE decisions.
📞 Contact Matt Bingaman today to start your commercial real estate journey.