Commercial facility

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Commercial facility
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Commercial facility (otherwise: commercial property or commercial real estate) is an asset that is meant to generate income for the owner. Commercial facilities have meaningful impact in economic growth and development of the city. Demand for commercial facilities comes from the economic activity of companies. Since land and buildings are factor inputs in productive action, demand varies across time (as technologies of production evolve) and space (distinct locations possess advantages for different types of usage of land[1].

Categories of commercial properties

Commercial facilities can be divided into different categories, that are mostly related to sectors of employment. We can distinguish[2]:

  • Retail buildings,
  • Office Property,
  • Business opportunity,
  • Industrial Facility,
  • Ranch or Farm,
  • Shopping Center,
  • Medical Property,
  • Multifamily building,
  • Vacant Developable Land.

Every type of commercial real estate finds different usage, and each has its own way to make money from.

Commercial facility’s prices

Commercial facilities have diverse and troublesome financial features in comparison to different asset classes. The value of commercial real estate in relation to separate types of fixed capital has increased, because the cost of equipment investment goods in the world, has been decreasing promptly since the 1960s. The price of commercial properties is mostly decided by its income-generating ability. The price is also determined by land plot value, and cost of the building. Improvement value or rental price might also be used in measuring value of commercial real estate[3].

Devaluation of commercial facilities

Studies have shown, that there exists a contact between exchange rate volatility and returns of commercial facility investments. Considering tax policy, commercial properties have a tendency to depreciate in a fairly geometric sequence, with a rate between 2% to 4% of the enduring price of a building per year. When it comes to non-residential land, the highest percentage of devaluation is observed in office facilities and retail buildings, and industrial properties experience the slowest loss of value[4].

Footnotes

  1. Ball M., Lizieri C., MacGregor B.D. (1998)
  2. Keim L.K. (2007)
  3. Yu H., Pang H., Zhang M. (2018)
  4. Wang T., Wang Y., Zhao X., Fu X., (2018)

References

  • Ball M., Lizieri C., MacGregor B.D. (1998), The economics of commercial property markets, Routledge, London and New York
  • Conti P., Harris P. (2008), Commercial Real Estate Investing For Dummies, Wiley Publishing, Indianapolis
  • Keim L.K. (2007), The fundamentals of listing and selling commercial real estate, Infinity Publishing
  • Tagg A. (2019), Technical Due Diligence and Building Surveying for Commercial Property, Routledge, Abingdon and New York
  • Wang T., Wang Y., Zhao X., Fu X. (2018), Spatial distribution pattern of the customer count and satisfaction of commercial facilities based on social network review data in Beijing, China, "Computers, Environment and Urban Systems", Vol. 71, September 2018
  • Yu H., Pang H., Zhang M. (2018) Value‐added effects of transit‐oriented development: The impact of urban rail on commercial property values with consideration of spatial heterogeneity, Papers in Regional Science, Vol. 97 Issue 4, November 2018

Author: Bartłomiej Bargiel