Real estate types by usage
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There is a number of ways to distinguish different groups of real estate. One of them is distinguishing according to the factual usage or purpose of the estate. While there is also a legal classification of property according to usage, this article refers to its practical, everyday functions. Considering this, there are three types of real estate:
Residential property is real estate designed for everyday living. It usually contains a number of sub-units, such as rooms, utilities, cooking area, etc., although there also are the so-called ’studio apartments’ which combine everything into one room. Usually, when people are asking ’How to buy real estate?’, they mean residential property.
There are two main categories of residential estate - private houses and apartments in multifamily residentials. When considering to buy a house in Latvia, this is one of the first choices to make. The second question is the tenure status - whether one wishes to buy or to rent an apartment/house. In Latvia, most of the residents are the owners of their apartments/houses, either with or without mortgage, however renting an apartment becomes more and more popular choice, especially among younger people.
Commercial property is real estate meant to generate profit by being leased out or sold. As opposed to industrial property, which houses a manufacturing industry (with the possible exception of warehouses) that, in turn, generates profit, commercial real estate generates profit ’by itself’, that is by housing other business that pays the owner of the commercial property.
In Latvia the two most popular types of commercial property are offices and spaces in shopping centres. Both of the respective markets are currently (2017) stable, with rent and vacancy rate remaining more or less the same. Naturally, the highest prices are in the capital city of Riga, while on the periphery (as Riga is located almost in the very centre of Latvia) rent is the lowest. Inside Riga, the highest prices are in Old Riga, the historical centre of the city. It is interesting to note, that while vacancy rates in Old Riga are also rather high, it is not due to the prices tag, but due to the clusters of commercial property with poor accessibility.
Industrial property is real estate that serves as premises to some sort of manufacturing industry or to an auxiliary unit of such an industry. This category also includes power plants and other energy production facilities.
The Latvian market of industrial property is especially active in the sector of small-scale locations - there is a notable shortage of industrial premises from 1 000 m2 to 2 000 m2. This is all despite a constant increase in the supply of such real estate. Most of the industrial property is located in or around the capital. As for the prices for leasable property - rent rates are relatively low (around 3.5 EUR per m2 per month) and are projected to remain stable, except for the warehouse sector. Because of innovative new projects, old warehouse owners may reduce rent rates in the nearest future.