Commercial Real Estate Investing Through REITs

I keep seeing investors put “commercial real estate” in the same mental drawer as office towers bought by pension funds. That picture is incomplete. A single share of a REIT can provide an investor with an interest in the same broad asset class, without buying a building or becoming a landlord.

That accessibility is useful, but it should not be confused with simplicity. Commercial real estate (CRE) is still exposed to the economy, interest rates, sector demand, financing costs, and changing property values. A REIT changes the vehicle. It does not remove the risks of the assets inside it.

First-order thinking says, “REITs make commercial property easy to own.” Second-order thinking asks which properties the REIT owns, what price is already reflected in its shares, whether liquidity matters more than control, and whether the investor is being paid enough for the risks of that particular sector. Those are different questions.

This is educational information, not investment advice. REIT suitability depends on an investor’s own circumstances. Consult an advisor and verify current market conditions, which can change over time. For a wider comparison of traded, non-traded, and private structures, see our private REIT pillar guide.

What counts as commercial real estate

CRE is income-producing property held for rental income and/or appreciation rather than an owner-occupied home. It includes office buildings, industrial and warehouse/logistics facilities, retail centers and shopping malls, multifamily apartment complexes, hotels and hospitality properties, and specialized property such as data centers, self-storage facilities, healthcare facilities, and cell towers.

What connects those categories is their purpose: they are operated as businesses to produce income from tenants. They house commerce, industry, living, and infrastructure. That makes CRE a large and varied investment asset class, not a single bet on one property type.

REITs invest across these sectors. Owning a REIT is therefore a way to gain exposure to commercial real estate, although the exposure, liquidity, fees, structure, and risks vary by REIT.

Why investors use REITs for CRE exposure

Direct commercial property often requires millions of dollars, market knowledge, financing capacity, and hands-on management. Those requirements can put a direct deal beyond the reach—or outside the preference—of many individual investors.

A REIT pools investor capital to own a portfolio of properties, then issues shares. Instead of buying a warehouse, apartment complex, or office building, an investor can buy an interest in a company or trust that owns or finances real estate. The practical advantages can include:

• A low minimum: with a traded REIT, an investor may buy a single share rather than a building.
• Liquidity: traded REITs trade daily, unlike direct property, which is generally illiquid.
• Diversification: one REIT can own many properties, reducing the dependence on a single building.
• Professional management: operating teams handle leasing, financing, maintenance, and portfolio decisions.
• No direct management burden: the investor is not the landlord.

REITs made an asset class once associated with pension funds and the ultra-wealthy available at the price of a single share. That is a real change in access. It is not a promise that a share will hold its value or that an investor will be able to sell at a preferred price.

The major CRE sectors

Each CRE sector has its own income drivers and risks.

• Office REITs own office buildings leased to businesses. Employment conditions and work patterns matter, including the effect of remote work.
• Industrial REITs own warehouses, distribution centers, and logistics facilities. E-commerce and supply chains are important demand inputs.
• Retail REITs own shopping centers, malls, and net-lease retail. Consumer spending is central, and e-commerce can pressure parts of the sector.
• Multifamily REITs own apartment complexes. Housing demand and rent growth matter.
• Hospitality REITs own hotels and lodging. Travel demand is a major driver.
• Specialty REITs own property such as data centers, cell towers, self-storage facilities, and healthcare facilities. Digital infrastructure and demographics can be important to them.

An investor can target a sector—for example, industrial for e-commerce exposure—or diversify across sectors. Neither choice is automatically better. Industrial may benefit from e-commerce but face oversupply risk. Office can face headwinds from remote work while trading at lower valuations. Multifamily can benefit from housing demand while facing supply and rent-regulation risks. Data centers can benefit from cloud computing and AI demand while carrying concentration and obsolescence risk.

There is no universal “best” CRE sector. The relevant question is whether a sector’s prospects, risks, valuation, and role in the portfolio fit the investor’s view and capacity for loss.

Minimums and accessibility

The difference in required capital is one of the clearest distinctions between a traded REIT and a direct CRE purchase. A traded REIT can be bought in a brokerage account like a stock, often for the price of a single share—commonly tens or low hundreds of dollars. A direct commercial property can require millions.

Traded REITs also offer daily liquidity. That makes entry and exit easier, but it brings daily market-price volatility. A traded REIT’s share price can move with the market’s view of property, rates, and earnings, sometimes ahead of, or differently from, private-property values.

Non-traded and private REITs work differently. They can have higher minimums—sometimes thousands or more—limited redemptions, higher fees, and suitability restrictions. They are generally available only to accredited or otherwise-suitable investors after a suitability review. Their prices may be set at net asset value (NAV) rather than moving each day with market sentiment, but lower day-to-day price movement is not the same as liquidity or lower risk.

Market context and cyclicality

Commercial property moves in cycles. Economic growth can support demand for space, rents, and values. A downturn can reduce demand and pressure them. Interest rates affect property values and REIT financing costs. Sector trends can change the picture further: remote work can affect office demand, while e-commerce can support industrial demand and pressure some retail formats.

Different sectors can be at different points in their cycles at the same time. CRE is not one market. A broad label can hide very different operating conditions beneath it.

For traded REITs, the share price represents the market’s current view of those conditions. Sometimes that price moves ahead of private-property values. Sometimes it diverges from them. That is why a REIT investor should look at both the property story and the price paid for it.

REITs versus private CRE deals

REITs are not the only route to commercial real estate. Investors can also use syndications, private funds, or direct ownership of the property itself.

Traded REITs are generally liquid, low-minimum, diversified, passive, and professionally managed. The tradeoff is a lack of control over individual properties and, for traded shares, market-price volatility.

Private CRE deals can offer more control, targeted exposure to a particular property or strategy, and potential direct tax benefits. Direct ownership can also carry potential 1031 eligibility. But private deals often require higher minimums, may have accredited-investor thresholds, can lock up capital for years, and can require more involvement or more reliance on a sponsor. See REIT vs. DST vs. direct ownership: a full comparison.

REIT shares are securities, not direct real property. They are not 1031-eligible. An investor cannot complete a 1031 exchange into or out of REIT shares, and selling shares is generally a taxable event, as with selling stock. Direct CRE ownership, and certain structures that hold direct real estate such as DSTs, can be different; a related 721 UPREIT can allow some property owners to contribute property to a REIT operating partnership on a tax-deferred basis, but that is distinct from a 1031 exchange using REIT shares. Consult a CPA on the tax treatment of a specific investment.

Neither route is universally better. REITs can fit an investor who wants accessible, liquid, diversified, and passive exposure. Private deals can fit an investor who wants control, specific-property exposure, or direct-property tax features and can accept higher minimums and illiquidity. Some investors use both.

Key takeaways

• CRE is income-producing office, industrial, retail, multifamily, hotel, and specialty property, including data centers and storage.
• REITs can offer low minimums, liquidity when traded, diversification, professional management, and no direct landlord duties.
• REITs can provide a targeted sector position or broad sector diversification.
• Private CRE can provide control, targeted exposure, direct tax benefits, and possible 1031 eligibility, but generally requires more capital and accepts more illiquidity.

How Baker 1031 helps investors assess CRE access

Baker 1031 Investments helps investors understand what CRE includes, how REITs create access, how sectors differ, how minimums and liquidity differ by structure, and how REITs compare with private CRE alternatives. The aim is to help an investor assess exposure in light of goals, capital, and risk tolerance.

REIT interests are offered through Aurora Securities, Inc. (member FINRA/SIPC), and any recommendation follows a suitability review. Non-traded or private REITs are typically for accredited or otherwise-suitable investors; publicly traded REITs are available through ordinary brokerage accounts. Baker 1031 can discuss sector exposure, broad diversification, traded versus non-traded structures, and private alternatives where relevant. Baker 1031 does not provide tax or legal advice, although it can coordinate with an investor’s CPA on tax questions, including the difference between REIT shares and direct property for 1031 purposes.

Frequently Asked Questions

What is commercial real estate?

Commercial real estate is income-producing property held for rent and/or appreciation rather than a personal residence. It includes offices, warehouse and logistics facilities, retail centers, apartments, hotels, data centers, cell towers, self-storage, and healthcare facilities. These properties are operated to generate tenant income. A REIT can provide exposure to a portfolio of that kind of property.

How do REITs make commercial real estate accessible?

REITs pool capital to buy or own portfolios of commercial property and sell shares to investors. They can reduce the need for large direct capital, operating expertise, and landlord work. Traded REITs can provide single-share minimums and daily liquidity, while REIT portfolios can offer diversification and professional management.

What sectors of commercial real estate do REITs cover?

REITs cover office, industrial, retail, multifamily, hospitality, and specialty property. Office follows employment and work patterns; industrial follows e-commerce and supply chains; retail follows consumer spending; multifamily follows housing and rent conditions; hospitality follows travel; specialty property can follow digital-infrastructure or demographic demand. An investor can target a sector or diversify among them.

What is the minimum to invest in commercial real estate through a REIT?

For a traded REIT, the minimum is usually the cost of a single share, often tens to low hundreds of dollars, purchased through a brokerage account. Non-traded and private REITs can have higher minimums, sometimes thousands or more, and commonly require accreditation or other suitability. Those structures may still require far less capital than acquiring a commercial building.

How do REITs compare to private commercial real estate deals?

REITs, particularly traded REITs, are generally liquid, low-minimum, diversified, passive, and professionally managed, but do not provide property-level control and traded shares can be volatile. Private deals, including syndications, private funds, and direct ownership, can provide control, targeted exposure, and possible direct tax benefits, but typically require more capital, are illiquid, and may require more work or sponsor reliance. Direct property may be 1031 eligible; REIT shares are not.

Is commercial real estate through REITs risky?

Yes. CRE is exposed to the economy, interest rates, and sector-specific conditions. Traded REIT shares can also be volatile and can diverge from property values. Diversification across many properties may reduce single-property risk, but it does not eliminate market, rate, or sector risk. Position size and sector mix should reflect risk tolerance.

Which CRE sector is the best to invest in?

There is no single best sector. Industrial may face e-commerce support and oversupply risk. Office may face remote-work pressure and lower valuations. Multifamily may benefit from housing demand but face supply and rent-regulation risk. Data centers may benefit from cloud and AI use but have concentration and obsolescence risk. Sector performance varies, and past results do not guarantee future results.

Can I get 1031 treatment investing in CRE through a REIT?

No. REIT shares are securities, not direct real property, so they are not eligible for a 1031 exchange. Selling them is generally taxable. Direct CRE ownership and certain DST structures that hold direct real estate can have different treatment, while a 721 UPREIT is a separate tax-deferred contribution mechanism for some property owners. Consult a CPA about a specific situation.

Are traded or non-traded REITs better for CRE exposure?

It depends on priorities. Traded REITs offer daily liquidity, low minimums, transparent market pricing, and simple brokerage access, but share prices fluctuate. Non-traded REITs are commonly priced at NAV and may show less daily price movement, but they can be illiquid, can carry higher fees, and have suitability restrictions. The SEC’s investor bulletin on non-traded REITs is a useful starting point for reviewing those considerations.

Why is commercial real estate considered cyclical?

CRE values and rents change with economic growth, interest rates, and sector conditions. Expansions can increase demand for space, while downturns can pressure it. Rate changes affect values and financing costs. A sector can also move differently from another sector. Traded REIT prices often reflect the market’s view before private-property values are reset.

Do REITs give exposure to data centers and other specialty CRE?

Yes. Specialty REITs can provide exposure to data centers, cell towers, self-storage, healthcare property, and other specialized property. Data centers and towers can be tied to cloud computing, AI, and digital infrastructure; healthcare can be affected by aging demographics; self-storage can be influenced by housing and life transitions. These sectors have their own risks, including concentration or obsolescence risk.

Can REITs let me diversify across CRE sectors?

Yes. An investor can combine sector REITs—such as industrial, multifamily, and data-center REITs—or use diversified REITs, REIT index funds, or ETFs that hold many REITs. That can spread exposure across differing property types and demand drivers. It does not prevent losses, but it can avoid putting the entire CRE allocation into one sector or one property.

Is investing in CRE through REITs better than buying property directly?

Neither is better in every case. REITs can fit a passive investor seeking liquidity, diversification, professional management, and no landlord burden. Direct ownership can offer control, leverage, depreciation and other tax features, and possible 1031 eligibility, but it requires capital, expertise, management, and acceptance of concentration and illiquidity. A blend of REIT exposure and direct ownership can also be appropriate for some investors.

How are CRE REIT dividends taxed?

REIT dividends are mostly taxed as ordinary income and reported on Form 1099-DIV, rather than at the lower qualified-dividend rates that can apply to many stock dividends. A portion may be return of capital or capital gains, and the 1099-DIV identifies the components. The 20% Section 199A deduction on qualified REIT dividends, made permanent by the 2025 OBBBA, can reduce the effective tax rate on the qualifying portion. This is not tax advice; consult a CPA about the treatment of a specific investment.

How does Baker 1031 help me access CRE?

Baker 1031 helps investors compare CRE sectors, REIT structures, minimums, liquidity, diversification, and private CRE alternatives. REIT interests are offered through Aurora Securities, member FINRA/SIPC, subject to suitability review. Non-traded or private REITs typically require accredited or otherwise-suitable investors; traded REITs are available through brokerage. Baker 1031 can coordinate with a CPA on tax questions but does not give tax or legal advice.

Glossary

• Commercial Real Estate (CRE): Income-producing property held for investment, not a residence.
• Office REIT: A REIT owning office buildings leased to businesses.
• Industrial REIT: A REIT owning warehouses and logistics facilities.
• Retail REIT: A REIT owning shopping centers, malls, and net-lease retail.
• Multifamily REIT: A REIT owning apartment complexes.
• Hospitality REIT: A REIT owning hotels and lodging.
• Specialty REIT: A REIT owning data centers, towers, storage, or healthcare property.
• Diversification: Spreading capital across properties or sectors.
• Liquidity: The ability to buy or sell readily; traded REITs generally have higher liquidity.
• Low Minimum: The small amount needed to invest through a traded REIT.
• Professional Management: Experienced teams operating a REIT’s properties.
• Syndication: A private, pooled CRE deal that can be an alternative to a REIT.
• Private CRE Deal: Direct or syndicated CRE with higher minimums and illiquidity.
• Cyclicality: CRE sensitivity to economic and market cycles.
• 1031 Eligibility: Direct CRE can qualify; REIT shares do not.
• Net Asset Value (NAV): The per-share value used to price a non-traded REIT.

Sources & References

1. U.S. Securities and Exchange Commission, Investor.gov — Real Estate Investment Trusts (REITs).
2. U.S. Securities and Exchange Commission, Investor Bulletin: Non-traded REITs.
3. Nareit, What’s a REIT?.
4. FINRA, Real Estate Investments (Investor Information).

Disclosures

This article is published by Baker 1031 Investments, LLC for general educational purposes for accredited investors and is not an offer to sell or a solicitation of an offer to buy any security, nor is it tax, legal, accounting, or investment advice or a recommendation. Any securities offering is made solely through a sponsor’s private placement memorandum (PPM) following a suitability determination. Securities offered through Aurora Securities, Inc. (ASI), member FINRA / SIPC; Baker 1031 Investments is independent of ASI.

Oil & gas mineral and royalty interests and DST programs are speculative, illiquid securities sold only to verified accredited investors and involve substantial risk, including possible loss of principal, commodity-price and production-decline risk, lack of control, and the risk that an intended 1031 exchange fails to qualify for tax deferral. Whether a particular interest qualifies as like-kind real property is a fact-specific legal determination that varies by state and by the terms of the instrument. Tax results depend on your individual circumstances. Consult your own CPA and attorney before acting. Past performance does not guarantee future results.

Source notes

Filed under: REIT, REITs, and Market.

About the author. Jerry Baker is Founder & Managing Principal of Baker 1031 Investments. He holds FINRA Series 22 / 63 / SIE credentials and spent more than a decade on Wall Street working on more than $10B of real estate before building diversified DST portfolios for individual investors. Read full bio →

Reviewed by. Lori Kamen, President & CCO, Aurora Securities, Inc., FINRA Series 4 / 7 / 24 / 53 / 63 / 66, the supervising registered principal. Last reviewed June 2026. Baker 1031 reviews its educational content periodically for accuracy and regulatory compliance. Securities offered through Aurora Securities, member FINRA/SIPC.

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I am managing capital in this part of the market by separating access from conviction: I want the liquidity or control I actually need, and I want to know the sector and valuation risk I am accepting. Where are you choosing access over control, and why?