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A Guide to Successfully Investing in Commercial Buildings

Investing in Commercial Real Estate (CRE) is a good way to establish a consistent source of passive returns. CRE investors also get easy liquidity and amazing growth opportunities – two things you don’t get with owning residential properties. Until now, the price of entry into CRE was highly prohibitive to small-scale retail investors.

Now, good deals in the global CRE market may be on the horizon. The COVID19 pandemic didn’t infuse positivity into the world. But it did open up promising avenues for aspiring CRE investors. The global economic downturn and the rise of remote working meant CRE prices waned in 2020.

Since then, prices have recovered strongly. According to JP Morgan, the global CRE industry has an incredibly positive outlook in 2022 and beyond. For example, the occupancy rate in brick-and-mortar retail stores increased by 10.4% in 2021. People still want to purchase goods and services in-person, eat at restaurants, etc.

That’s why CRE is now a risky but highly promising asset class. Plus, this market consists of a wide variety of property types. New investors can consider getting into different types of commercial real estate investments such as:

  • Retail stores
  • Office buildings
  • Industrial warehouses
  • Restaurants
  • Storage spaces
  • Hotels
  • Casinos
  • Healthcare facilities

Why is CRE a promising asset class for global real estate investors? There are several valid reasons such as:

  • High Income Potential: Commercial buildings have a higher potential for growth and returns compared to residential properties. Real estate investors can earn thousands per month just from rental income by choosing the right properties.
  • Tax Benefits: Investing in CRE can drastically lower your overall tax burden. For example, investors can write off the depreciation of their buildings from their taxable income each year.
  • Easier Entry: While the global residential real estate market is currently super-competitive, CRE isn’t. Since 2020, investor confidence in CRE has dwindled. Now is the ideal time for small-scale investors to enter the CRE market. Compared to other asset classes, commercial properties with strong growth potential are now easier to find and cheaper to buy.
  • Fewer Risks: Unlike residential rental agreements, commercial buildings don’t operate on short-term, six-month, or one-year lease agreements. Most commercial tenants prefer signing two to three-year agreements. Hence, the costs and hassles of discovering and securing new tenants are significantly less. Investors can establish stable, long-term cash flows. Plus, maintaining commercial buildings is easier. Commercial tenants share property maintenance duties.

Investing in CRE is also a logical way of diversifying your portfolio. But, 2020 has taught us that investing in assets with the most growth potential is very important. Here are the types of commercial buildings that present the best investment opportunities in 2022 and beyond –

On-Demand Warehouses

The need for on-demand warehouses in convenient locations is rising every year. These commercial buildings are key components in global supply chains. Both online and traditional retailers use these warehouse spaces to meet eCommerce service demands as time-efficiently as possible.

According to recent studies, the United States alone will require 330+ million square feet of storage and distribution spaces by 2025. Owning some of these spaces can give investors incredible income opportunities.

Trending Commercial Spaces

Due to international market forces and technological advancements, commercial real estate classes are evolving. Here are some “trending” CRE assets –

  • Mobile homes and RV parks due to the rising demand for affordable housing.
  • Self-storage centres due to the rising demand for storage spaces.
  • Office buildings as more entrepreneurs are choosing to rent office space, not buy.

CRE Assets for Establishing Long-Term Generational Wealth

Not interested in the short-term outlook of your real estate investment portfolio? Then, consider making long-term investments in proven CRE asset classes. They include – hotels, healthcare facilities, casinos, office buildings, storage spaces, and industrial warehouses. These commercial properties have high long-term income potential.

Investing in CRE will always be a smart decision in the long run. Savvy investors from across the world will keep investing in these properties. But, choosing the right types of commercial buildings is critical.

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