Best Commercial Investment Sectors
Industrial Real Estate – The No.1 Commercial Investment Sector
The ugly duckling has become a prime real estate investment assuming the first position on the list of most sought-after commercial properties. Their popularity is evident given the massive shortage we have seen lately. The leading cause of this lack of warehousing space is the thriving online retail landscape. These online businesses need to have a physical place to store their online inventories. So now, companies are competing for the luxury that is an available warehouse or distribution space.
Industrial real estate is hot right now and is thus one of the best commercial investment sectors.
Thus, if an investor manages to find a warehouse they can lease or flip, it would generate great profit for them. Another even better option is multi-tenant industrial or Flex Space.
Next in Line – Retail Space
Yes, the pandemic has had some impact on the retail sector. However, the truth is that only Super Regional Shopping Centers have suffered substantial losses. What is more, many of them went into receivership. Other than that, retail space is still a widely popular and sought-after commercial real estate investment option.
Moreover, rumor has it that Amazon is eyeing out the struggling shopping centers. This multinational tech giant has assumed a predatorial stance and is waiting to lunge and bury its teeth into the flesh of this valuable piece of real estate and breathe a new life into it. These failing shopping centers will likely become Amazon Fulfillment Centers.
Some large shopping centers are hurting at the moment.
As for the other retail real estate options, they are still going strong. Strip centers along the main roads are almost fully occupied. And the tenants are sporting long-term leases. For this commercial investment sector, the core real estate motto is as true as ever – location, location, location! The more desirable the area, the better occupancy, and higher lease rates.
Therefore, fear not if you find suitable retail property to invest in but do some research before taking the plunge.
Hospitality – One of the Best Commercial Investment Sectors
The pandemic is nearing its end, which is something we can all celebrate. And what better way to do it than to go on an exotic trip. After months of being cooped up in our homes and unable to travel, people are eager to pack their suitcases and hit the road.
And why is hospitality one of the best commercial investment sectors? Because hotels are hard to find. Plain and simple, if an investor can find a piece of real estate they can flip and turn into a hotel, they will turn a profit.
Small Office Space
If you see an opportunity to invest in smaller office space, particularly if it’s in a newer office condominium complex, go for it. If you see a substantial institutional office complex, look away. Here is why – such complexes and office buildings will face serious problems once the leases expire. This will be another consequence of the pandemic.
When companies sent their employees home to work, they were left with a lot of empty space to pay the rent for. They realized that they didn’t need so much space. So, it is highly likely they will rent smaller offices later.
Large office building complexes will hurt, and some already are hurting. However, there lies the potential for future redevelopment.
Where To Invest?
Once you decide what type of commercial real estate to invest in, it is necessary to choose where to do it. It is always wise to see which areas boast a growing economy. Tax considerations are also in order. For example, Florida excels in both of these categories. And if we consider the glorious weather all year round, we may conclude that investing in hospitality real estate might be the way to go. The Sunshine State also ranks high in terms of the business sector, so it’s another point to keep in mind.
Commercial Investment Sectors to Avoid
There are some options that people may find attractive but are essentially not a great investment choice.
Multi-family investments have always been a good option. However, they are over-inflated now, so those considering diversifying their investment portfolios may want to reconsider this option for now. It is a fact that everyone wants to invest in multi-family housing. It is highly desirable and easy to understand. However, the cap rates are at 3.5%. And we know that the lower the cap rate, the higher the value.
Multi-family housing is not the best investment option now.
The problem is that REITs and Hedge Funds will easily outbid an average buyer. This creates a considerable shortage but generates little return on investment.
Gone are the days when owning a piece of land was always a good investment. Now, it is ill-advised to purchase vacant land. The only scenario in which this is a good idea is if it is next to a developing hospital with medical zoning. Always keep in mind that bare land takes a considerable amount of time to develop. And until it does, it is an asset that generates no income.
While what constitutes the best commercial investment sectors will change, as it always does, particularly now that we are battling the pandemic, one thing remains the same – investing in real estate is never a bad investment. It is necessary to follow market trends and do thorough research to inform your investment moves. You need to know what mistakes to avoid when buying a business, real estate, or making any other type of investment. That is the only way to ensure success. And that is something that has never changed.
Meta: Learn what the best commercial investment sectors are and make an informed decision about your next investment endeavor.