When it comes to commercial property, ROI (Return on Investment) can vary widely depending on the property type, location, market conditions, and investment strategy. Here’s a simple breakdown:
| Property Type | Typical ROI (Annual) | Notes |
|---|---|---|
| Office | 6–12% | Prime locations may be lower but stable; secondary markets can be higher but riskier |
| Retail | 6–10% | Depends heavily on tenant stability and location |
| Industrial/Warehouse | 7–12% | Growing e-commerce demand often boosts ROI |
| Multi-Family | 5–10% | Stable cash flow if occupancy is high |
| Mixed-Use | 6–12% | Combines risks and rewards of commercial and residential |
What’s considered “good”:
- 6–8% is generally a safe, moderate return in most U.S. markets.
- 8–12% is considered strong, especially if the property is well-leased and low-maintenance.
- Over 12% can be attractive but often comes with higher risk (e.g., in emerging markets or under-managed properties).
A solid way to evaluate is the cap rate (Net Operating Income ÷ Property Value), which gives a quick snapshot of expected ROI.
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Here’s a simple table showing good ROI benchmarks for different commercial property types:
| Property Type | Typical Cap Rate / ROI | What’s Considered Good ROI |
|---|---|---|
| Office | 6–12% | 7–10% |
| Retail | 6–10% | 7–9% |
| Industrial/Warehouse | 7–12% | 8–11% |
| Multi-Family | 5–10% | 6–9% |
| Mixed-Use | 6–12% | 7–10% |
Notes:
- Cap rate = Net Operating Income ÷ Property Value. Higher cap rates usually indicate higher returns but also more risk.
- Location, tenant quality, and market trends can significantly impact ROI.
- Always compare the expected ROI to other investments in your area and consider your risk tolerance.