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Why You Should Invest in Commercial Real Estate

Posted by Jerad Giottonini on June 23, 2022

According to a report by Kenish Shah, Co-Founder of PropReturns, a company that helps folks invest in properties in India, CRE can generate a consistent income flow in the form of rentals and is one of the best investments for passive income.

Long Tenure & Stable Investment

Shah says commercial assets, like office space, retail space, warehouses, and other commercial properties, are secure investments because they can generate recurring rental revenue.

According to researchers at Mountain West Commercial Real Estate, we are seeing an increase in clients who are leasing properties in the major regions we work. This year alone, our team of brokers helped clients lease 283 properties this year alone.

Mountain West is noticing tenants typically having longer lease terms which provide investors with a more reliable and predictable stream of income. New numbers indicate out of the 283 total leases in 2022, 67 are office space.

“Office spaces generally tend to be good investments for at least four to five years. If the company does not have a head office or corporate office yet, in such cases, the lease tenure could go up to 10 years with the possibility of subsequent renewal at the tenant’s request,” Shah said. “Pre-leased commercial properties being already rented to tenants reduces vacancy risk”.

Analyzing Market Trends

According to Certified Commercial Investment Member (CCIM) nationally, the office market should pick up in the second half of 2004 with the vacancy rate declining from the first quarter’s 17.9 percent to around 17.2 percent by year-end. Absorption through the remainder of the year should total around 25 million square feet. Asking rental rates are likely to end the year slightly lower, although concessions already are beginning to diminish in the most desirable buildings and submarkets.

Nationally, the central business district vacancy rate is nearly 400 basis points below the suburban rate (15.4 percent versus 19.3 percent). CBD construction totals 1.4 percent of current total inventory versus 1.1 percent in the suburbs. The suburban construction pipeline has emptied out more thoroughly, and the suburban vacancy rate should decline more briskly than the CBD vacancy rate in the next few quarters. However, CBD construction above 1 million SF is a factor in only five markets: Washington, D.C., Chicago, New York, Boston, and Philadelphia.

Trend to Stay

While the pandemic is nearing an end, most businesses have reopened their doors and called staff back to work. In addition, most people are trying to return to work for a variety of reasons, including family sizes, smaller homes (in metropolitan cities), and unpredictable internet connections.

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