Commercial real estate can be a hot commodity, depending on what you purchase - and when. According to data from The Motley Fool, in 2023 alone, commercial real estate transactions were reportedly $647 billion. The previous year they were $1.14 trillion.
As with any investment, you need to consider the best commercial property investments. But with numerous types of properties available, which one is the best for your investment and what strategies should you deploy?
Understanding Commercial Real Estate
"Commercial real estate" is a blanket term for a variety of real estate types. For example, commercial real estate might be any of the following:
- Office buildings
- Warehouses of various sizes
- Apartment/condominium buildings
- Any type of industrial building
- "Mixed-use" buildings that house a variety of retail stores, apartment rentals, and office spaces, such as a strip mall
If you're looking to purchase a real estate investment property in Antelope Valley, CA, it's important to work with an experienced property manager.
Benefits of a Commercial Property Portfolio
As with any investment, there are pros and cons. Before purchasing a commercial property, it's important to look at the benefits.
Return on Investment
Anyone in search of real estate with income potential might want to consider a diversified commercial property portfolio. Look for properties with a high return on investment (ROI). Conduct thorough market research and commercial market analysis.
Build Relationships
Commercial real estate boasts professional relationships between great tenants and landlords. If you're interested in a commercial property, you'll most likely own it as an LLC and not individually, which means you'll have a more professional relationship with your prospective tenants.
Brand Awareness
When purchasing a strip mall, each tenant is aware of the way their brand looks to the general public. To encourage customers, your tenants will take pride in their stores. You'll mutually benefit from caring for your building.
The Best Investment Strategies
Commercial real estate isn't without its risks - you have to weigh the good against the bad. For example, commercial properties are often more expensive. They also require more time commitment and are subject to both a market and vacancy risk.
When investing in office buildings you may receive a steady income from tenants, possible property appreciation, and tax advantages.
Office buildings may have high maintenance costs and some units vacant for longer than you'd like, especially during an economic downturn.
Industrial buildings can be cost-effective to maintain and may have higher profit margins. You'll also find fewer vacancies.
Multifamily properties appeal to a wide range of tenters. You may have tax benefits to help offset some of the cost of ownership.
Retail developments are typically in high-traffic areas, promoting a steady flow of customers. Some landlords get additional revenue when tenants pay them a small portion of their sales, provided it's in their commercial lease agreement.
You can also look for special-purpose real estate for niche industries. This might offer high returns on your investment and even command a higher rent for your premium space.
Commercial Property Investments
The best commercial property investments consider ROI, conduct a commercial market analysis, and understand that an economic downturn can affect your investment. This doesn't mean you shouldn't invest - it just means you need to select your rental property wisely.
Commercial property investments are also time-consuming, especially if you have multiple buildings. However, an experienced property manager like PMI Antelope Valley can help. Get your free rental analysis now.
