In this post, we take a closer look at owner-occupied commercial real estate, an essential concept within CRE. Here, we discuss the definition of owner-occupied commercial real estate and the difference between owner-occupied and non-owner occupied commercial real estate.
Owner-Occupied Commercial Real Estate: a Definition
As the term suggests, owner-occupied commercial real estate (abbreviated as OOCRE and also known as owner-user commercial real estate) refers to commercial properties that are used by the business that owns them as sole owner or anchor owner.
Owner-occupied commercial real estate is more than an abstract classification; it can also have a tangible real-life impact. Just consider that for some commercial real estate loans, the Small Business Administration (SBA) requires that the property be 51% owner-occupied, or even 60% owner-occupied if it’s a new construction.
Benefits of Owner-Occupied Commercial Real Estate
While many businesses start by renting, eventually they decide to purchase the commercial property out of which they operate in order to take advantage of benefits such as:
- Greater flexibility to customize the facilities
- Asset depreciation
- Tax deductions
- Possibility of generating rental income
- Asset diversification (remember that real estate is an asset in itself)
Examples of Owner-Occupied Commercial Real Estate
As you can see, the definition of owner-occupied commercial real estate is very broad. This means that there are many types of owner-occupied commercial properties.
For the sake of illustrating the concept, here are some of the most common examples of owner-occupied commercial real estate:
- Retail shops
- Office space
- Industrial property
- Medical or healthcare
- Special purpose properties
Owner-Occupied Commercial Real Estate vs Non-Owner Occupied Commercial Real Estate
As you might have guessed, the term “non-owner occupied commercial real estate” refers to the opposite of owner-occupied commercial real estate, that is, properties not occupied by their owner.
However, the classification “non-owner occupied real estate” applies mostly to residential real estate, where it refers to properties that are rented to others, such as multi-family apartment buildings or condominiums.
Disclaimer: This material is for general information and educational purposes only. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.
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