6 Most Profitable Types of Commercial Property Every Investor Should Own

Want to turn a profit in 2025? Discover the most profitable types of commercial property and learn how to invest smarter in today’s CRE market.

‍

After a multi-year slump marked by rising interest rates and economic uncertainty, commercial real estate is turning a corner. As interest rates stabilize and key types of commercial property see increased demand, CRE investors are cautiously optimistic.

‍

Now seems the time to get in on the action – yet investors can’t just blindly jump into the market and think they’ll turn a profit. Challenges in the market for commercial buildings remain, like: 

• Rising costs: Insurance premiums and operational expenses are climbing, squeezing profit margins for many property owners
• Tight lending conditions: While interest rates are stabilizing, financers remain cautious and financing more expensive than pre-pandemic levels 
• Market volatility: Uneven recovery across sectors means investors risk investing in underperforming and overvalued commercial property categories

‍

In today’s complex commercial real estate market, some types of commercial property promise profits while others are in distress. Industrial properties and retail space are booming. Meanwhile, office buildings show historically low occupancy and failing valuations. 

‍

This article dives into seven types of commercial property that stand out for their profitability in 2025 and explains why they’re worth your attention this year. 

‍

Whether you’re a seasoned investor or new to the intricacies of commercial real estate investment, this guide will help you make informed decisions and pick out investment opportunities in a complex market. 

‍

We cover the following assets and essentials:

1. Retail centers
2. Industrial properties
3. Multi-family
4. Data centers
5. Hospitality
6. Multi-use
7. About commercial property and cap rates

‍

Read on to learn about the most profitable types of commercial property and bring your investment knowledge to the next level.

‍

In need of short-term capital to close an equity deal? With Duckfund, you can borrow up to $100 million for debt and equity deals across all property sectors.

‍

1. Retail centers riding a wave of consumer demand

Retail centers are booming in 2025 and provide some of the highest average cap rates available in the commercial real estate industry. Especially retail spaces anchored by grocery stores and essential services have proven their resilience even during economic downturns, as they cater to consistent consumer needs.

‍

With increased consumer confidence and rising rents, retail centers are in high demand as an asset class. Think of shopping centers, strip malls, power centers or big-box stores, and retail spaces in mixed-use buildings in residential areas.

‍

Why is retail profitable?

Retail space availability will remain limited in 2025. Despite lower interest rates, the high cost of capital will make it challenging to finance new projects and expansions, especially in markets where rental rates may not justify the expense. With little new space scheduled for delivery in 2025, the low retail availability rate will lead to higher rental income, according to CBRE.

‍

Source: CBRE

‍

Opportunities in retail properties

• Potential store closures could present investment opportunities
• Properties in areas with high foot traffic and suburban growth see better performance.
• A mix of tenants ensures income stability even if one tenant vacates
• Older retail center renovations can be used as mixed-use spaces, adding value

‍

2. Industrial properties and e-commerce 

Industrial properties are the backbone of the modern economy, particularly in 2025 as the e-commerce sector continues to grow. Bulk warehouses, distribution centers, and last-mile delivery hubs are in high demand as companies like Amazon and FedEx expand their logistics networks. For instance, last-mile delivery solutions will be crucial to boosting agility by ensuring more reliable deliveries in 2025, according to investment firm Colliers.

‍

Why industrial buildings are profitable

The growth of e-commerce has driven demand for strategically located facilities near transportation hubs, ensuring tenants and steady rental income for strategically located facilities. 

‍

Additionally, industrial leases are often long-term (5–10 years) and structured as triple-net leases, where tenants cover operating expenses.

‍

Opportunities in industrial real estate

• Last-mile delivery hubs close to urban centers are critical for meeting same-day delivery demands
• Temperature-controlled warehouses are growing in demand due to online grocery sales
• Older industrial spaces can be converted into modern logistics hubs or multi-use facilities

‍

3. Multi-family provides a reliable income stream

Multi-family commercial real estate has long been a cornerstone of institutional investment, and 2025 is no exception. With rising housing costs and a lack of affordable options, demand for rental units remains robust. 

‍

How many units is considered commercial property? Apartment buildings with five or more units – think of mid-rise apartments in urban areas – are classified as commercial real estate, offering steady cash flow and lower volatility compared to single-tenant buildings. Multifamily properties are particularly attractive in urban centers and growing suburban areas where rental demand is high.

‍

And can Airbnb qualify as commercial property? This distinction can be important due to rental and zoning laws that vary by location. Short-term rental contracts are often limited to residential properties. In that case, Airbnb properties can only be considered commercial real estate when they’re used for business purposes (when used, for instance, as full-service hotels).

‍

Why multi-family is profitable

These assets benefit from high occupancy rates, as renters continue to outnumber buyers due to rising mortgage costs and limited housing supply. CBRE expects average multifamily rents to grow by 3.1% annually over the next five years, above the pre-pandemic average of 2.7%.

‍

Additionally, multifamily properties often provide opportunities for value-add renovations, allowing investors to increase rental income even more over time.

‍

Opportunities in multi-family real estate

• High-density urban areas with strong job markets ensure consistent tenant demand
• Suburbs experiencing population growth are ideal for affordable multifamily developments catering to families and immigrants
• Renovating older properties or adding amenities like fitness centers can justify higher rents

‍

4. Data centers are fueling the future

As artificial intelligence, cloud computing, and digital infrastructure demands grow, demand for data centers is skyrocketing. From hyperscale facilities to colocation spaces, these commercial real estate properties are critical for supporting the exponential growth of AI-driven applications and global data storage needs. 

‍

This special purpose sector is projected to grow at a compound annual growth rate (CAGR) of 15% through 2027,  according to global real estate form JLL. In 2025 alone, an estimated $170 billion worth of data center assets will require development or permanent financing.

‍

Source: JLL

‍

Why data centers are so profitable

Data centers are in hot demand. Preleasing rates for new facilities are expected to exceed 90%, ensuring minimal vacancy risks. With limited supply in key markets and rising rental rates, data centers are a lucrative investment opportunity.

‍

Opportunities in data center real estate

• Tech giants often prelease space, reducing investment risk
• Secondary cities such as Atlanta and Madrid attract investments due to lower land costs and improved connectivity
• Investors can add value by retrofitting older facilities with energy-efficient cooling system

‍

5. Hospitality profits from the travel rebound

The hospitality sector is set for a remarkable resurgence in 2025, with insiders increasingly confident in the sector's growth potential. Some 94% of US hotel investors expect to maintain or increase their hotel investments this year, up from 85% in 2024 – according to CBRE's 2025 U.S. Hotel Investor Intentions Survey.

‍

Cap rates for the hotel industry are currently 8-9%, according to Anthony Capuano, president and CEO of Marriott International. Capuano expects to see new construction start as soon as credit becomes more readily available for hotel development. "When we talk to our owners and franchisees, it's not interest rates or construction costs [deterring new construction]," Capuano told attendees of the Americas Lodging Investment Summit. "It's the availability of debt for new construction

‍

Why hospitality is profitable

Hotels and resorts are seeing strong performance as both leisure and business travel recover, making this an opportune time for commercial real estate investors to enter the market. 

‍

Urban markets are especially attractive hospitality growth markets, with cities like New York, Chicago, and Nashville experiencing a resurgence in group, corporate, and international travel. 

‍

Opportunities in hospitality real estate

• Hotels in central business districts are projected to see higher growth 
• High-end hospitality outperforms the market, with luxury and upper-upscale hotels in high demand

‍

6. Mixed-use developments offer diversified returns

What is a commercial residence? It typically refers to a property that serves both residential and commercial purposes.

‍

Mixed-use developments are transforming urban landscapes in 2025, combining residential, retail, and commercial spaces into cohesive communities. These properties show stronger performance in office attendance and retail sales compared to single-use developments, according to James Patches, who is a former McKinsey partner.

‍

Why mixed-use is profitable

Mixed-use properties offer stable returns through diversified income streams. James Patchett sees that, given good marketing and property management, these developments draw demand from a synergetic effect between different types of tenants. “Success is a virtuous cycle, where people are drawn to an area because it’s a place they want to be.” 

‍

According to Patchett, “Companies are drawn to locate offices there because the talent is there. Restaurants, retailers, and other businesses come because there are offices and residents there.”

Opportunities in mixed-use:

• These developments offer the opportunity of driving premium rents in urban locations
• Integration of flexible workspaces and other new commercial property types
• Retail spaces and on-site restaurants benefit from built-in customer base

‍

What is commercial property and what are cap rates?

Understanding both what is considered commercial property and how cap rates work is essential for identifying commercial real estate trends in today’s market. 

‍

Wondering what is commercial property?  Commercial property refers to real estate primarily used for business purposes, such as generating income through leasing or selling spaces to companies. 

‍

Commercial properties make up a massive market and are a crucial part of the U.S. economy. The total size of the US CRE investable universe is $26.8 trillion, according to a report from market consultancy Clarion and Rosen Consulting Group (RCG). 

‍

Where residential properties are designed for living, commercial real estate (CRE) can serve all kinds of income-producing purposes. That’s why examples of commercial real estate types include retail centers, industrial facilities, multifamily housing (generally with five or more units), and office space. These properties are essential for supporting economic activity, making them a cornerstone of investment portfolios.

‍

Different types of commercial real estate, like data centers and self-storage, are sometimes overlooked but make up a significant chunk of the CRE market – accounting for $9.9 trillion or 37% of total commercial property value. These alternative sectors present are gaining increased institutional attention, highlighting the importance of being informed and not just sticking to traditional types of commercial real estate like office or retail. 

‍

Source: Clarion and Rosen Consulting Group

‍

From high-end commercial properties like luxury retail centers to niche segments like self-storage facilities, each category offers unique risks and rewards. So rather than just looking at the share of the total CRE market these different types of commercial property represent, it helps to look at their cap rates. 

‍

What is cap rate on commercial property? Often used to evaluate commercial properties, cap rates measure the return on investment relative to the property’s value. Cap rates can vary widely depending on property type and location but typically range from 3% to 10%. Many more factors influence rap rates, from capital market conditions, liquidity, and risk, to global asset demand and broader economic expectations. 

‍

Cap rates are forecasted to slightly compress in 2025 due to interest rates remaining at higher levels, a 2025 outlook from investment firm CBRE reports.

‍

 Source: CBRE

‍

But while macro factors like interest rates might impact cap rates, their influences depend on the strength of each type of commercial property. That’s why it’s all the more important to invest in the right CRE assets and get a head start during the current cycle’s early phase. 

‍

Finding a great investment opportunity can be hard in today’s complex CRE market. Given current lending policies, closing a CRE deal can be even harder. Duckfund’s equity financing of up to $100 million in just five days helps you secure the deal from start to finish.]