Most of our fix-n-flip projects have involved residential real estate, but commercial property can also be bought and renovated as an investment with our lending tools.
The commercial market requires some scrutiny to find the best, less risky, options for your investment.
Commercial real estate is property that is used exclusively for business purposes and property that is leased out to provide a workspace rather than living space. Investopedia
According to the “2019 U. S. Commercial Real Estate Market Outlook,” by CBRE, the outlook is good for all four major commercial real estate asset types: office, retail, industrial, and multifamily and three of our Texas towns, Houston, Fort Worth, and Dallas, are on their chart of the Top-10 Markets for Annual Rent Growth over the next 5 years.
On the other hand, JP Morgan is more cautious and expects more modest growth in the commercial real estate market. In their 2019 Commercial Real Estate Outlook by Alfred Brooks, they point out certain areas that are riskier than others and some that still look like good investments.
Together the two investment experts expect 6 situations to influence the market.
- Online Consumption of All But Food: As more of today’s shoppers move online, traditional brick and mortar real estate stores and malls will be risky investments, except for traditional grocery stores, which have not yet been affected by online competition. JPMorgan
- Online Goods Need Storage: While trade wars and possible recession affect the value of industrial property, the expansion of e-commerce creates more demand for industrial buildings that can be repurposed to store and distribute goods sold online. JPMorgan
- More Jobs than Workers: Strong demand for modern and efficient office spaces with lots of amenities, driven by employers in their effort to keep employees in a competitive labor market will keep this market healthy as long as the spaces themselves and lease structures are flexible. CBRE
- Upscale versus Modest Housing: Upscale multifamily housing has been overbuilt in many markets, but housing shortages still exist in affordable housing in the Class B and Class C units that cater to renters. This shortage of affordable housing makes more modest multifamily housing an attractive investment. JPMorgan & CBRE
- Preference for Urban Living: Young people continue to live in the city and are willing to trade square footage to avoid a long commute and live where they work and play. Their preference has kept the multifamily housing market healthy. JP Morgan
- Interest Rates: What can I say about interest rates other than interest rates affect everything, and the Fed looks like they might be raising interest rates and are unlikely to lower them unless there is a financial crisis. This situation makes this a good time to consider buying commercial real estate so you can lock in a lower rate. JP Morgan
REI Capital Resources is a funding source for large commercial projects such as office buildings, 5-40 door multi-family buildings, and many others. These programs vary wide and far throughout the gamut of lending. Call or e-mail for more information.
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Brooks, Alred R. JP Morgan 2019 Commercial Real Estate Outlook http://www.jpmorgan.com
Chen, James, Investopedia Commercial Real Estate Definition, April 2019. https://www.investopedia.com/terms/c/commercialrealestate.asp
CBRE, 2019 U.S. Real Estate Market Outlook. https://www.cbre.us/research-and-reports