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Small commercial property

Strip retail, small office, small industrial/flex. Higher sophistication than residential — tenant credit matters more, leases are 5–10 years (vs. 1), vacancy can last much longer, tenant improvements at lease execution can be substantial.

Best sub-segments for individual investors: net-lease single-tenant retail (Walgreens, dollar stores, fast food — long leases, tenant pays expenses, very passive); small grocery-anchored centers ($2–10M total value, manageable scale, stable demand); small flex/light industrial — last-mile warehousing is the strongest commercial sub-segment of the 2020s.

Sub-segments to avoid (unless you have specific expertise): office, especially commodity (structurally challenged); enclosed malls (concentrated tenant risk, co-tenancy clauses); hospitality (these are operating businesses, not real estate).

Tenant credit is the dominant variable. A 10-year lease to a national investment-grade tenant trades at much lower cap rates than the same building with a regional operator. Underwrite the tenant's business, not just the lease.

#commercial#net lease#strip retail

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