Commercial Real Estate
IntermediateCommercial real estate (CRE) is property used for business purposes, such as offices, shops, warehouses, factories, hotels and, in some definitions, large apartment buildings, typically owned to generate rental income.
Commercial real estate is usually divided into sectors: office, retail, industrial and logistics, hospitality, multifamily residential and specialist properties, such as data centres, healthcare buildings and student housing.
Commercial properties are typically leased to businesses under longer contracts than residential property, often for five to fifteen years or more. Their values depend heavily on the rental income they produce, the quality of tenants and the length of leases.
For example, an investor might buy an office building let to several companies, earning rent and hoping the property’s value rises over time.
Commercial real estate is a major asset class for pension funds, insurers, real estate investment trusts and private equity funds, and is a large part of bank lending. Its performance is linked to the economy and interest rates. In recent years, the shift to remote and hybrid working has weakened demand for some office buildings, while warehouses and data centres have benefited from growth in online shopping and cloud computing.
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