Asset Classes

Commercial Real Estate

Parent Asset Class

Commercial Real Estate (CRE) is property used exclusively for business purposes or to provide a workspace rather than a living space. Commercial properties used for business activities are referred to as house businesses, lands that generate profit, as well as residential rental properties. Ranging from a single gas station to a huge shopping center, Commercial real estate includes retailers of all kinds, office space, hotels, strip malls, restaurants, and convenience stores.

  • commercial properties are valued on their long-term predictable income streams
  • Valuation is based on a "Cap Rate" (Capitalization Rate)
    • Cap Rate of 10 used to be a good deal (rare as of 2018)
    • Falling interest rates (and higher property prices) have reduced cap rates significantly