Niche Commercial Real Estate Investments for Entrepreneurs

Many business owners have already tapped into traditional rental properties, but niche commercial real estate investments offer another route. Spaces like data centers, self-storage units, and medical offices are often overlooked but can deliver solid, steady returns. They don’t always get the spotlight, but they keep bringing in income. According to Bankrate, commercial real estate in the U.S. had an average return of 9.5% in 2021, compared to 10.6% for residential and 11.8% for REITs.

Only 6.7% of individual tax filers in the U.S. reported owning rental properties in 2021, according to Pew Research Center, showing there’s still a lotta room for newcomers. For those already running businesses, niche commercial assets can complement existing ventures without needing to be overly hands-on. Sometimes people just want something that’s less of a hassle but still grows their money. Exploring beyond apartments and office buildings can open doors to more tailored, purpose-driven opportunities.

Real estate is often seen as a sure thing. You buy a property, fix it up, rent it out for years, and then sell it for a handsome profit. But as many real estate investors have discovered, desired returns aren’t guaranteed. At some point, market volatility and economic uncertainty impact most markets. 

Commercial properties aren’t immune, even though this real estate sector generally performs differently from residential. Properties like shopping centers, strip malls, and office buildings fall under the traditional commercial umbrella. While these rentals can add value to your portfolio, savvy investors are looking at less conventional options. 

Expanding beyond the tried-and-true can increase returns, open doors to new partnerships, and introduce more favorable financing opportunities. These benefits make exploring niche commercial real estate investments worth a look. Here are the top unconventional commercial properties to consider adding to your portfolio mix.  Therefore, you should know what to expect when deciding if real estate is for you.   

Mobile Home Parks 

Mobile homes seem like they’d fall into the category of residential properties. If you invest in one mobile home, you’d probably be right. However, you officially move into the commercial zone when you purchase an entire park. Depending on the park’s structure, your future tenants could own their homes while you own the lots. Alternatively, you could own the homes plus the land. 

Most mobile parks operate under the first model, where investors take responsibility for the land and standard amenities. These properties are considered a niche in the commercial real estate world because zoning laws often restrict the number of them. Zoning laws also determine where mobile home parks can exist within a jurisdiction. 

These properties are considered recession-resistant because of their lower maintenance expense and the affordability factor behind the homes. Investors are more likely to see healthy returns when the overall market is experiencing unpredictability. It’s also easier to secure seller-financed deals, helping you avoid most of the risks associated with conventional financing.   

Lifestyle Investing expert, Justin Donald, speaks from experience about mobile home parks and financing, “I’ve personally had two parks fully seller-financed and four parks partially seller-financed. It’s my favorite way to buy. You know, that’s a non-recourse loan. It means they can only take the property back if anything goes wrong. They can’t sue you for all your other assets, which I like. It de-risks the deal.”    

Self-Storage Units 

Downsizing isn’t new, and neither is opting to rent instead of buying a piece of the American dream with a white picket fence. What is new is an uptick in trends favoring downsizing and renting rather than buying. The need for smaller spaces is behind the increase in the desire to downsize. Smaller homes cost less to maintain and are easier for homeowners to manage. 

The increase in the share of would-be homebuyers choosing to stay renters is due to the same core reasons. Buying a home is becoming less affordable, as is maintaining one. The bigger the property, the more expensive it is. Average sale prices nationwide are now slightly above $500,000, a 32% bump from 2020. 

People shifting toward smaller properties to control their housing costs may not have room for all their stuff. Naturally, some of those belongings will go. Downsizers will sell and donate what they can. Nonetheless, there will be items they can’t part with just yet and won’t fit in their new homes. 

As a result, they’ll turn to storage solutions if the costs are within budget. Self-storage units represent a niche commercial real estate investment opportunity to meet the need. The returns on self-storage REITs or real estate investment trusts are impressive, too. In 2024, a self-storage REIT achieved a return of over 30%. Like mobile home parks, self-storage properties are a low-maintenance investment option that tends to beat market averages. 

Medical Offices 

Healthcare is an industry that keeps the lights on despite the overall economy’s performance. In the face of uncertainty, people will continue prioritizing their basic needs. Medical services are one of those, substantiating the steady demand for healthcare-related offices. 

Telehealth might be growing in popularity, but technology can’t yet replace in-person visits for many services. A dentist can’t work on your teeth from afar. And while physical therapy videos can help you implement a home exercise program, you still need onsite treatment to recover. 

Medical office buildings are a well-defined niche for commercial real estate investors with historical above-average returns. As a sector, medical office buildings produced a return of 85.7% over the prior 10 years. Compare this growth to the overall index’s return of 77.4%, and you’ll realize why medical offices are attractive to investors.   

Compared to office buildings,, spaces devoted to outpatient medical care tend to have lower vacancy rates. When units aren’t empty, it means steadier rental income for investors. Plus, you don’t have to spend as much on leasing agent commissions to find replacements for the vacant tenants. Adding medical office buildings to your commercial real estate portfolio helps balance the risks associated with less resilient properties like strip malls.   

Data Centers 

Industrial properties, such as data centers, are additional niches to consider. Organizations from the private and public sectors have to store tech equipment somewhere. And often, there’s insufficient space to accommodate growing server and network operations center needs in one building. Security and redundancy requirements may also dictate moving a portion of sensitive tech equipment off-site. 

Data center spaces accommodate the demand for organizations with in-house network operations. In addition, these buildings serve the needs of companies providing cloud-based services. McKinsey estimates that global demand for data center capacity will be between 19% and 22% annually from 2023 to 2030. 

Emerging technologies like AI will contribute to the growing demand. McKinsey also projects that twice the data center capacity built since 2000 will be necessary to avoid a supply shortage. Investors owning data centers will have a clear advantage if there is less supply than demand. 

Returns could significantly outpace other commercial real estate sectors as organizations scramble for space. Increases in market rental rates are likely to happen until supply meets demand. Even then, the continued boom in technological developments and cloud migrations will keep fueling demand. Investors with holdings in the data center niche will be able to realize the value of acting on foresight. 

Investing Outside the Box 

Commercial real estate investments mean tenants with larger budgets and distinct needs. Investors also must prepare for bigger financing goals and different types of leases. Traditional properties involving retail can be rewarding, but not as resilient when there’s economic uncertainty. Niche properties, such as mobile home parks and data centers, can offer benefits you can’t get elsewhere. Above-average returns and less risk are some of them.