Is 2021 a good time to invest in Commercial Real Estate?

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invest in commercial real estate

In the Pandemic Era, almost everything has come to standstill, the recession is hitting hard and most of the industries are worse affected. While the current situation isn’t really favorable for anyone but, it can be the best possible opportunity for the investors, how? As the property costs go low, people can make purchases and benefit from the property once everything falls in place.

Commercial real estate investors typically play a long game, looking years ahead rather than making short-term decisions

With the best properties sloping down in price, buyers have a great opportunity to buy properties by reexamining their investment strategies. While many of the investors must be thinking its more favorable to buy commercial properties either by direct buying or by commercial real estate auction. Commercial real estate has relatively been a powerful and much stable investment for the ones seeking to preserve their wealth and parallelly grow their portfolios.

CRE auctions provide a fair opportunity for the buyers to choose from a wide range of properties but putting up their bids for the same. Well, why is it a good time to invest in commercial real estate, let’s find out why to consider investing in real estate-

  • Increasing Demand for Office Space  

Today’s corporate giants are growing larger every day! The investors require to look no further than the current Fortune 500 list in order to discover that America’s 500 largest corporations have attained a record of $13.7 trillion in revenues equating to more than two-thirds of the US economy. In the year 2019, Amazon recorded a revenue hike of 20% year over year while the other biggies like Google and Apple have been hitting amazing revenue milestones and have announced major plans for their office expansions. With the news of the top companies increasing business, the demand for commercial real estate to house the growing teams of talent will gradually rise and grow in number. These companies are always looking for the best amenities for their employees including indoor and outdoor community space, along with the services of food halls and other required services.

  • Hedging Against Inflation  

According to a survey, the US Labor Department recently revealed that the core consumer price index is up by 2.4% from last year. In the times of inflation, institutional investors may seek a hedge against the rising inflation through investing in commercial real estate. While the values of commercial properties are mostly based on the net income and market capitalization rates. In general, cases, when inflation initiates, rents and other expenses are on a rise. this can lead to an increase in net income, particularly in the multi-tenant properties which can further result in a rapid rise in the values of the properties.

  • Intrinsic Value  

Many investors may choose commercial real estate investments because they the tangible assets with the inherent value. The Economist William D.Larson has approximated the value of America’s land in the contiguous 48 states with nearly $23 trillion along with the values varying widely among states. Investing in a small portion of that land may provide immediate upside even before commercial property owners implementing the value creation strategies.

“Commercial properties are good investment opportunities to earn regular income as they offer high rental rates compared to residential properties. While residential properties, during an economic downturn, are much better than commercial properties, said Ravindra Pai, managing director, Century Real Estate.

However, rental income and price appreciation depends on many factors such as current market trends, location, social and physical infrastructure. These are deciding factors for both commercial and residential property to appreciate.

Investors must compare their options and price trends before investing either in commercial or residential property. A due diligence is a must with regard to price, location and property prospects before buying.