Reader Question: I am researching commercial real estate. Who invests in commercial real estate in the U.S.?
Monty's Answer: The definition of commercial property is buildings owned by an investor or investors to generate income from rent. According to the National Association of Real Estate Investment Trusts (NAREIT) the total size of the commercial real estate market in the U.S. is near $16 trillion. Many of the organizations that track real estate consider industrial, retail, office, lodging, and amusement as the types of real estate that are considered commercial.
There are different schools of thought as to classify property that derives rental income from homes or apartments as commercial. NAREIT includes multi-family in their calculations.
Vacant land is treated as commercial property by some organizations that track statistics, but not others, even though vacant land can generate rental income. According to The Land Report, John Malone is the largest private landowner in the U.S. with 2.2 million acres, which is about twice the size of the state of Delaware. According to A 2017 Congressional Research Service report the largest landowner is the federal government with 640 million acres. You can read that report at http://bit.ly/2SC70ap. For your research, commercial real estate statistic results will vary considerably as the definition of "commercial" changes.
Who owns commercial real estate
Commercial real estate ownership is represented by people or organizations that invest in commercial real estate as a way of building wealth. I recently met a young woman who bought her first two-family apartment when she was 19-years-old. Her father taught her how to work, save, manage and negotiate real estate transactions. She has parlayed that first investment into six properties and will likely continue investing in real estate into the future. Her investments are considered private equity.
Commercial real estate by owner type is private equity (Individuals, Small 2-10 person LLC’s), families, large corporations, insurance companies, financial institutions, governments, foreign investors, real estate investment trusts (REIT’s) and religious institutions.
The private equity investors are consistently the most abundant type of investor. Often, private equity is higher than 50 percent of the total pool. The remaining seven types account for the balance.
If your research is for the intent of jumping into the market, here is another link you may find interesting at https://dearmonty.com/seven-costly-mistakes-of-new-real-estate-investors/.
Richard Montgomery is the author of "House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home." He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or find him at DearMonty.com.