Understanding the Different Types of Real Estate
The term real estate encompasses the land on which buildings or structures stand. It also includes the right to inhabit those buildings or structures, as well as minerals and other natural resources that are underneath the surface of the land. Real estate can be a lucrative investment, as it often appreciates in value over time, and can also provide a steady source of income. It’s important to understand the different types of real estate in order to make informed decisions about whether to invest.
A person may own real property as either a principal or an investor. An investor buys and holds real estate with the intention of turning a profit by renting or selling it in the future. Principals are owners of real estate who use it for their own residence or for commercial purposes. In addition to the above-mentioned property types, other forms of real estate include:
Generally speaking, there are six primary categories of real estate:
Residential real estate refers to new construction and resale single-family homes. It also includes townhouses, condominiums, duplexes and multi-generational housing. Commercial real estate includes shopping centers and strip malls, hospitals, educational facilities, hotels and offices. Industrial real estate includes warehouses, distribution centers and factories. And vacant land is any land that has no existing buildings or structures on it, including farms and ranches.
The earliest use of the word real estate can be traced back to the feudal system in which property was immovable and owned by royalty. The modern definition of the word is a bit more broad. It can be thought of as any type of property that is affixed to the earth, as opposed to personal or intellectual property, which is movable and can be sold or licensed.
A real estate developer takes raw land and makes it productive by building or renovating it to sell or rent to end users. This process requires significant financial resources and is a high-risk endeavor. Real estate development is usually done with the assistance of professional developers and consultants who manage the process from start to finish.
As technology and demographic trends change work and living patterns, the real estate industry must adapt quickly. For example, many professionals interviewed for this article noted that office buildings have become less desirable since the pandemic, as millennials and other demographic groups prefer to live at home and avoid long commutes. This has shifted demand to industrial and retail properties.
Corporate real estate is an essential component of a business, yet it rarely receives senior management attention. This is because internal real estate functions tend to be reactive, second-order staff functions that are focused on discrete projects and deals rather than strategic issues. In addition, corporate real estate is subject to pressures from other parts of the company that can interfere with sound strategic decisions. This article explores five maxims that every business leader should consider when guiding the real estate function of their organization.