If you are eyeing to venture into the real estate sector for investment purposes, let’s first understand what types of property you have on the plate to invest in. Well, there are four kinds of real estate: land, residential, commercial, and industrial. Though residential properties are typically considered the most popular choice, according to Mordor Intelligence, India’s commercial real estate market size is projected to grow from USD 40.71 billion in 2024 to USD 106.05 billion by 2029, at a CAGR of 21.10% during the forecast period (2024-2029).

Don’t you think that this is the perfect time to know more about commercial real estate for wiser real estate investment? So, here, in this blog, we will take a deep dive into the sector of commercial real estate and explore its intricacies with the best possible insights.

What is Meant by Commercial Real Estate (CRE)?

Investopedia says that commercial property is a property type that is specially developed for business purposes or to provide workspace rather than residential space. This expansive category encompasses a diverse array of structures and uses, including:

Office Buildings:

Office spaces offer vaster space than retail ones and often include conference rooms, cafeterias, and fitness spaces. This property type is developed for accommodating business operations, ranging from small startups to large corporations. There are three  subtypes of this commercial real estate:

• Class A: The best of its kind with its best quality, location, and aesthetics.
• Class B: Ideal for business owners seeking to revitalize an office building for profitable returns.
• Class C: The oldest kind of commercial property with the need for significant renovation.

Retail Spaces:

Companies selling products directly to consumers or other businesses utilize retail spaces. This commercial property segment offers a wide range of options, from shopping malls, strip malls, department stores, and individual retail establishments to large-scale department stores, presenting investment opportunities for individuals with diverse financial capacities.

Industrial Properties:

Industrial real estate comprises warehouses, manufacturing units, and distribution centers. These properties aim to provide a diverse range of facilities crucial to the functioning of modern economies.

Mixed-use Properties:

Mixed-use properties are popular in urban areas. This commercial property integrates retail and restaurants in the lower part, whereas the upper part of the building accommodates residential flats. Mixed-use properties also include hospitals, nursing homes, and hotels that lease or rent available building space.

Why Real Estate Investors Are Drawn to Commercial Real Estate:

Commercial properties come up with various investment options. So, real estate investors, especially those under the age group of 36-60, tend to pour their money into commercial property. Recent years have seen a hike in CRE investment in India.

According to a recent Anarock study, Noida and Gurugram in Delhi NCR are the leading contributors to commercial space supply. This surge in supply has spurred heightened demand for commercial properties, consequently boosting rental yields and capital appreciation for investors. Real estate developers maintain a positive outlook on the continued expansion of the NCR’s commercial real estate sector.

Here is a list of prospective reasons for the heavy investment in the commercial space sector:

High Rental Yields & Stable Income Streams:

Investing in commercial properties is more fruitful than residential properties. Prime locations like Gurugram and Noida command high rental yields, typically ranging from 4.1%  and 3.8% respectively annually. This income is more consistent than the stock or the mutual funds, leading to a stable and predictable cash flow for the future.

Long-Term Leases:

Commercial tenants often sign long-term leases, providing investors with stable and predictable rental income streams. This long-term commitment enhances the stability and predictability of investment returns. Moreover, commercial tenants typically approach leasing with a professional and business-oriented mindset, ensuring timely rent payments and minimizing tenant-related issues.

Enhanced Portfolio Diversification:

By incorporating commercial property investment, investors can diversify their portfolios and mitigate the risk. The performance of commercial real estate often exhibits a low correlation with other asset classes, providing a valuable hedge against market fluctuations.

Inflation-Proof Strategy:

Commercial real estate serves as a fruitful hedge against inflation. As inflation rises, rental rates for commercial properties typically increase, allowing landlords to maintain or even enhance their income streams. Furthermore, during periods of economic growth, commercial property values tend to appreciate, providing opportunities for capital appreciation.

Opportunities for Business Expansion:

Investing in commercial property can unlock significant opportunities for business expansion. Property developers can leverage their property holdings to support the growth of their businesses. Owning a commercial property provides a readily available space for business operations, eliminating the need for costly leases and potentially reducing operating expenses.

Conclusion:

Every investment has its part of risks, and the real estate sector is not an exception. In this case, the capital investment for commercial investment is generally higher than for residential properties. Moreover, you have to be prepared to handle maintenance issues yourself. To maximize your return from your commercial property, you must successfully deal with multiple leases at a time, which can be stressful sometimes.

So, before investing, choose your investment goal. You can also seek assistance from an expert or a leading real estate developer. They will guide you through the right path and lead you towards success. Hope your new commercial real estate investment will bring a brighter life in 2025.