Is Commercial Real Estate a Good Investment?
Have you ever driven past an empty office building and wondered about the possibilities that could open up if you dialed the realtor’s number? Or seen a multi-unit dwelling that you know could be a money-making machine with some TLC and the right marketing?
If you have, you’ve taken the first steps toward potentially investing in commercial real estate. However, taking the keys in hand, finding the right tenants and setting up the infrastructure to support those tenants is a whole other matter. Investing in commercial real estate can come with as many risks as there are rewards.
To help give you a clearer sense of whether devoting your time, energy and your money to commercial real estate investment is right for you, GOBankingRates talked to some experts.
If the Building Suits the Market
When Rinal Patel, founder of We Buy Philly Home, thinks about the best approach to buying commercial real estate, she starts with the type of building, first and foremost.
With remote work becoming an increasing trend, certain properties, like office buildings, might not be a savvy investment. The rise of internet-based sales and purchasing have also had an impact on the viability of retail locations.
“The rise in e-commerce and remote work has increased demand for buildings such as multi-family apartments and industrial warehouses,” she said. “The surge in e-commerce has led to an increase in investor interest in industrial warehouses.”
Patel also shared that, as more people search for housing outside of crowded cities, multi-family homes are in high demand, making them wise choices for investors — more so than traditional properties like office and retail facilities, which now might have more vacancies and lower rental income.
However, before you imagine life as a landlord, Patel has a word of advice: “Even if these homes might still be a wise long-term investment, it’s crucial to fully investigate the state of the market and tenant demand prior to making an investment.”
If the Location Is Good
While office and retail spaces may not be the surer bets they used to be, Levelle Benson, the CEO of Benson Home Buyers, said they can still be solid investments depending on their sector and location.
Benson has seen a lot of change in the market over his 15 years in the business, and his current take on the lay of the land is that office spaces are still valuable in prime locations with modern amenities.
“The shift towards hybrid work models has created a demand for flexible workspaces,” he said. “Conversely, traditional large office spaces in less desirable areas may struggle due to reduced demand from remote work trends.”
As for retail spaces, foot traffic is everything. With more shoppers taking advantage of digital storefronts, brick and mortar counterparts must be in high traffic areas.
According to Benson, retail spaces that are adaptable to various formats or mixed-use developments are still promising investments.
If You’re Open To Doing the Work
Seasoned real estate attorney and owner of Grenier Law Corp., David Greiner, Esq. said, “The investors best suited for commercial real estate understand the local market and can properly assess risk.”
If you are keen to learn about the opportunities that match your skills and your risk tolerance, Greiner said you can find greater success as an investor. He would know, having started with a small office building himself, learning the ropes and building up.
His advice for newcomers? Start small, find the right partner, preferably someone with experience, or hire a property manager. Your willingness to research, gain knowledge and find support can make investing in commercial real estate very rewarding.
“Returns won’t happen overnight, but for patient investors seeking long-term income and appreciation, commercial real estate may be worth considering,” he continued. “The key is finding the right property for your needs and risk appetite. With some due diligence, the rewards can be substantial.”