When it comes to commercial real estate investing, there are certain types of properties that make more sense than others. In many cases, it depends on the current state of the market, but more so relies on the 5-10 year predictions of the market demands. To properly assess the type of commercial property you should buy, it’s advised to take a deep dive into the historical as well as forecast growth in your target market. Also consider the expenses that may come with certain commercial property types, such as management softwares for landlords who own apartment buildings, or unexpected taxes for industrial facilities. Despite the variety in market change, there are some types of commercial real estate that just seem to be increasing in value- and it’s pretty easy to understand why. Let’s have a look at a few of these.
Food isn’t going away anytime soon, and despite a decrease in in-dining revenues, delivery saw a huge increase in demand in 2020. Based on that, you might consider looking into a dining establishment that has SOME seating (for when COVID-19 ends) but also is able to facilitate delivery services effectively. Do your due diligence and run the projections for how your margins will look with delivery options- will you be outsourcing to tools like Uber Eats, or relying on your own drivers? There are pros and cons to both, but either way, food services continue to be in demand. If you want to learn more about how to establish a successful food business (specifically those that allow delivery), have a look at that article.
Shared Work Space Properties
There are an abundance of small businesses that need physical space to gather their troops and find a productive place to work outside of their homes. Companies like WeWork have been busy shifting their floor plans to accommodate more isolated, small team work environments (for COVID, but also for the nature of how people are using their space). Instead of purchasing a massive skyrise and sourcing it to a tech giant (which may also be an option), you can get a manageable space and have multiple office tenants, which allows you to design more flexible pricing as well as more easily manage the building (inspections, etc). The downside to a co working space however, may be that you have a lot of turnover, which can be a headache to manage. You might consider a good property management team. Also keep in mind that despite the potential of co working spaces- they are still (February 2021) struggling due to COVID-19. If you can hold out until the restrictions lift, then now could be the cheapest time to get in on the investment.
Production facilities will always be in demand for certain sectors. It might be in your best interest to explore the industries that are scaling quickly and will need dedicated warehouse space for production, storage, etc in the next 3-5 years. Companies like Boeing, Tesla, Amazon, Blue Origin (now that Bezos has announced his resignation) will all be scaling upwards in the next few decades, and will likely require additional space. Even the virtual reality sector will likely grow and scale over the next decade, and will need space to facilitate their VR experiences. If you need an idea of which types of industrial spaces to explore, you can reach out to our broker team via bizpappa.com, who will show you a variety of listings to explore. You can also email them directly at email@example.com.
Multifamily dwellings include apartment buildings, condo complexes, townhome communities, etc. The housing market certainly depends on your area, but in general it is currently (Feb 2021) a seller’s market, which means buyers are hungry for the best deals. Investing in a multifamily property certainly takes time, especially if it needs repairs or is being built from the ground up, but you can rest assured that if your building is in a decent area and taken care of, people will rent. Financial circumstances have rendered a lot of the working class unable to afford their own homes, so renting is their intermediary solution. If you’ve never owned or managed tenant housing however, I suggest to take the idea with a grain of salt. Financial trouble for tenants could result in defaulted payments for you- the landlord, which is never a good time. Do your due diligence on the market, as well as your own financial situation.
Special Purpose Properties
The final commercial investment property type is special purpose- such as theaters, churches, self-storage, etc. These non conventional property types are highly niche and require a high level of familiarity with the industry they serve. I say this is a good property type to invest in because much like other property types that have to do with physical events, they’re currently on the low, which means there may be an opportunity to buy the dip, so to speak. Special purpose properties (especially those that have to do with events) often do the best near highly populated areas of young people, who are more likely to engage in the industry topic. Churches however, might be best served in an older community. Do your research!
Overall, commercial real estate is a highly lucrative industry to get involved in, especially if you are able to time the markets right and have a deep understanding of the industry you’re investing in. At BizPappa, our broker team is specialized in commercial real estate, and would be happy to consult you on your goals, ambitions, and next steps. Reach out via firstname.lastname@example.org.