Info About Commercial Property Investment

Commercial Property Investment

The term commercial property (also called investment or income property) refers to buildings or land intended to generate a profit, either from capital gain or rental income.

Definition Of Commercial Property Investment

Commercial property investments includes office buildings, industrial property, medical centers, hotels, malls, retail stores, shopping centers, farm land, multifamily housing buildings, warehouses, and garages. In many states, residential property containing more than a certain number of units qualifies as commercial property investments for borrowing and tax purposes.

Real estate as the instrument of Commercial property investment

1. Residential real estate: The most common form of real estate investment as it includes property purchased as a primary residence. In many cases the buyer does not have the full purchase price for a property and must engage a lender such as a bank, finance company or private lender. Different countries have their individual normal lending levels, but usually they will fall into the range of 70-90% of the purchase price. Against other types of real estate, residential real estate is the least risky.

2. Commercial real estate:Commercial real estate consists of multifamily apartments, office buildings, retail space, hotels and motels, warehouses, and other commercial properties. Due to the higher risk of commercial real estate, loan-to-value ratios allowed by banks and other lenders are lower and often fall in the range of 50-70%.

Commercial property investment up on 2009

TURNOVER in the commercial property investment market this year could reach the 2008 figure of €750 million if the deals currently agreed are completed, according to the latest report on the Irish market by agents Savills. Demand is now outstripping supply for prime investment opportunities and prime yields are stabilising. However the report says transactions are taking significantly longer to complete and this is acting as a drag on overall turnover figures.

The largest sale underway – and not identified in the Savills report – is that involving Liffey Valley shopping centre in west Dublin, which is taking an inordinate amount of time to complete mainly because of the layout, location and future use of development lands on the site. Two UK investment funds are in negotiations to buy the centre, having offered €350 for it and an adjoining site of 7 hectares (17.3 acres) that will accomodate the second phase of the retail scheme. Meanwhile turnover in the first six months of this year was higher than in the same period of 2009, at just over €130 million compared to €85 million last year, according to Joan Henry, head of research at Savills.

The supply of commercial property investment properties remains at its lowest level since 2005 largely because of the collapse in values and scarcity of bank funding. And Savills is expecting good quality investments to remain scarce in the short term. “We estimate the current supply of investment stock available on the market – and not currently under offer – is still in the region of €250 million, the same as in Q1. Most of the stock is comprised of non-prime assets for which there is poor demand.

Commercial real estate is commonly divided into four categories:

Retail :medical centers, hotels, malls, retail stores, shopping centers
Office :office buildings
Industrial :industrial property, farm land, warehouses, garages
Multifamily:multifamily housing buildings

Of these, only the first three are classified as being commercial property investment. Residential Income Property may also be used to mean Multifamily Apartments.

Commercial Information Exchange:

A Commercial Information Exchange (CIE) is an Internet-based commercial property investmentlisting service that is operated by a local association to serve the local market. A CIE is the commercial real estate equivalent of the residential Multiple Listing Service.CIEs tend to exist in larger markets with a more developed, more organized commercial property investment real estate industry.

Commercial building:

A commercial property investment building is a building that is used for commercial use. Types can include office buildings, warehouses, or retail (i.e. convenience stores, 'big box' stores, shopping malls, etc.). In urban locations, a commercial property investment building often combines functions, such as an office on levels 2-10, with retail on floor 1. Local authorities commonly maintain strict regulations on commercial property investment zoning, and have the authority to designate any zoned area as such. A business must be located in an area zoned at least partially for commerce.

Commercial Property Investment, Commercial Property Investments