The commercial real estate market is on the upswing, there is no hiding that anymore. While that is good news for existing real estate investors, finding quality acquisitions is becoming increasingly more difficult as prices continue to rise.
The rental market is strong. The commercial real estate market is on the upswing. Net absorption of available space for the three major commercial property types: office, retail, and industrial, has been positive over the past three years. According to CoStar: Commercial Real Estate prices were up 5.1% Year-over-year in February.
Builders are reentering the market. Builders build when they think they can make money. With commercial property prices and demand increasing, builders are being drawn back into the market. Apartment developers have been back for awhile now, as the rental market is as strong as it’s ever been, but now they are being joined by residential builders. This will of course lead to building costs increasing. As more is built, the need for materials and labor increases, causing prices to naturally increase as well.
The recession, and commercial real estate collapse did result in so many foreclosures that banks couldn’t release all their inventory onto the market. If they did, it would have led to even further drops in value.
Banks aren’t in the business of property management, so all that inventory they are holding back from the market is just eating away at their bottom line, and ultimately making them uneasy. This can provide a huge opportunity for the right investors
So are you going to invest in commercial real estate now or are you waiting for the peak?
The commercial real estate market is heading up, the longer you wait to get in the game, the harder it is going to be to make money.
Building costs are increasing. Buying a commercial property below replacement cost gives you a leg up. Bear in mind that distressed sales have been on the decline. The percentage of commercial property selling at distressed prices dropped to 15.9% in February 2013 from over 18% for the previous month.
This information is for informational purpose and not intended to be investment advise, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.