Office properties consist of any property where the main use is office related. Although skyscrapers in the central business districts (“CBD”) are the most visible office buildings, a majority of office product is actually located in the suburbs which are closer to the workforce. In Denver for example, of the total office space in the market, only 25% is located in the downtown while the remainder is located in the suburbs.
Suburban offices are typically two to five stories tall and are around 50,000-150,000 square feet in size. CBD offices are typically 15+ stories tall and are 500,000+ square feet in size.
Industrial properties include warehouses, manufacturing facilities, and assembly plants. Industrial buildings are generally located in industrial parks on the outskirts of cities. Due to the nature of the work done in industrial buildings (e.g. manufacturing automobiles), the buildings tend to be fairly large. Therefore, being outside of the city provides more land for these larger buildings to be constructed.
Industrial buildings are simple, single-story, one dimensional buildings. The buildings will have four walls, some dock doors to load and unload product, a concrete floor, a roof, and usually less than 10% of Spartan office space.
Retail encompasses any building where a product or service is sold such as a retail store (e.g. Target, Best Buy, etc.) or a restaurant. Retail properties are located all over the place and include standalone buildings (such as a Wal-Mart), shopping centers, strip malls, and indoor malls.
Retail properties have the widest range of sizes. They can range from a small 800 square foot restaurant to a one million square foot mall.
Multi-family properties include apartments, condos, and town homes, but not single family homes. The one feature that makes multi-family unique is the type of tenants. Unlike an office tenant that may sign a ten-year lease, a renter will usually only sign a one-year lease. Now, multiply that tenant by 250+ apartments units and you start to get the picture of the beast you are dealing with.
Multi-family and hospitality (we’ll get to hospitality next) are by far the most management intensive property type. They require a host of dedicated staff to ensure all the tenants are happy and that all the units are fully occupied.
Hospitality properties include hotels, motels, and resorts. These properties are the most dissimilar of all the other property types due to the transient nature of the guests. Whereas in a multi-family property people rent apartments for a year, at a hotel people rent a room for a night. This short-term nature of renters means that revenues can be very difficult to forecast or predict.
Most hospitality companies own very few of their actual hotels. For the most part, they will franchise out the hotel to a third-party. As an example, in 2015 Marriott had 4,300+ hotels in operation worldwide. Of those, approximately 3,000 (70%) were franchised out.
Check out our Real Estate Career Guide for even more information on the different types of real estate properties!