There are many types of commercial land development that may suit your portfolio. Each type comes with its pros and cons, so it’s critical to evaluate each type and determine which work best for you. In the case of luxury communities, commercial real estate development occurs in a specific area to create a commercial corridor. This establishes a walkable community with a city-like feel, minus the necessity of living in an urban area. These developments can be great for investors, as they can take advantage of both the commercial and residential areas in the community to maximize profits. In this article, we’ll discuss different types of commercial real estate, why it’s a great investment, and how to choose a developer.
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What Are the Different Types of Commercial Land Development?
Commercial real estate is basically any real estate you use for business purposes, meaning that the land generates income in some way. Obviously there are many potential types of properties like this. Commercial land development generally falls into one of several categories:
Each type of commercial real estate is different and offers some pros and cons to weigh before investing. If you’re investing in a community, then some of these types of commercial real estate will be more popular than others.
Retail is by far the most common type of commercial land development in a mixed use community. These are spaces that offer goods and services for sale. For instance, in communities, the commercial corridor might include grocery stores, clothing shops, salons, and home goods stores. Restaurants also commonly fall into retail development. This type of land gets leased to businesses that provide services to average consumers. It’s really popular in mixed use, master planned communities because these businesses can cater to the surrounding demographic – the residents in the community.
Offices are another type of commercial land development. These are spaces that many professional businesses operate out of. Usually, offices house only employees for a business and have few visits from consumers, unlike retail spaces. You can also find these types of commercial spaces in mixed use communities. This can create a live-work-play environment where residents can live in the area, work in the area, and also enjoy retail and entertainment right in the community itself.
It’s very rare to find industrial development in a subdivision. However, it is another type of commercial real estate that exists. Usually, industrial workplaces can create undesirable conditions for surrounding residents, like excess noise. Therefore, usually industrial areas are separated from nearby residential areas to prevent these nuisances to homeowners. Otherwise, it can create an undesirable neighborhood that is difficult to get people to move into. It can also reduce rental prices for single family homes near industrial developments.
Hospitality is another type of commercial land development and includes things like hotels and motels that cater to travelers. Because master planned communities are typically situated in private areas away from the city, these aren’t very popular to find in these areas. Typically, tourists don’t come to subdivisions in suburban areas, they usually travel to urban areas with activities like sightseeing.
Commercial real estate can also fall into a specialty category. This is basically anything that doesn’t really fit the other categories like retail or offices. For instance, self-storage is a popular type of specialty commercial real estate. It’s also pretty popular near subdivisions, as many people use these facilities to store their items. Other specialty commercial real estate can include things like bowling alleys and amusement parks.
Multifamily/Single Family Rentals
Finally, multifamily (including single family rentals) are a type of commercial land development. While many mistake these developments for residential, they are actually commercial in nature, since investors purchase these properties to rent out and earn a profit. Multifamily is basically a group of residences designed to rent to tenants. When you think of multifamily, you might think of apartments, but keep in mind that single family homes can also fall under this category if they’re being used to make you money.
Why Invest in Commercial Land Development?
So, why all the fuss about commercial real estate and why should you invest in it? Commercial land development actually offers a lot of benefits for investors. For instance, they can generate stable passive income, since rent is set at a specific rate for both residential and commercial tenants. Additionally, keep in mind that commercial real estate tends to remain pretty steady. For instance, even after 2020 when the COVID pandemic began and many areas had stay at home orders, the values have stayed pretty steady or even increased.
Keep in mind that when it comes to residential tenants, typically they have a gross lease. This means they only pay rent (plus utilities) and the property owner pays for everything else. However, with commercial buildings, there may be several different types of leases to choose from. You can do a gross lease with business tenants as well, or you can choose a different option like single net, double net, or triple net lease. Single net lease is where the tenant pays rent plus property tax. Double net means they pay rent, property tax, and insurance. Triple net leases have the tenant pay rent, property tax, insurance, and property maintenance.
What to Look for in a Commercial Land Developer?
Not every development is the same, and a lot of that comes down to the commercial land developer. The developer has a lot of control over many different aspects of the process, which means it’s critical to choose one you can trust.
When choosing a commercial real estate developer, there are several things to look for. One is experience. An experienced developer has skills and knowledge that can ensure success and profitability for a property. After all, they’re the ones typically finding and researching the land, planning commercial land development, applying for permits, and overseeing the construction process.
Additionally, consider working with a local company for commercial land development. This offers a few different advantages. For one, they know local laws, codes, and regulations, since they work with them every day. Also, local companies tend to be smaller, which often translates to lower overall costs and faster turnaround times.
Finally, make sure you work with a commercial land developer that has completed similar projects. For instance, if you want to invest in mixed use community development to provide residences and commercial spaces for rent, then it’s critical to choose a team that has experience not only with both residential and commercial development, but also has created these master planned communities successfully. Remember, with horizontal mixed use, it’s essential to create a harmonious space that both businesses and residents love, which requires quite a lot of planning and specialized experience.
Expert Mixed Use Community Development from Landfinity
Our specialists at Landfinity offer experienced mixed use community development to investors throughout Texas. We are proud to provide turnkey solutions for communities designed to drive profits and return on investment. Investors love our communities because our development services truly optimize the space for performance that stakeholders love. Contact our team today for more information!