How is commercial real estate faring these days?
There are a lot of doomsday scenarios about the death of the real estate market, for one. There is also a significant population shift when it comes to people deciding whether or not to buy a home or invest their time in a new studio space. When it comes to investing in commercial property you need to remain in touch with what people need and why. Simply crunching numbers or theorizing won’t cut it these days when the market is too unpredictable for old-fashioned knowledge.
Let’s take a look at some statistics and get a better idea as to what a net lease adviser should be prepared for.
Commercial real estate, despite these aforementioned doomsday scenarios, is far from dead. If anything it’s thriving, with more people recognizing the value of their own space and going the extra mile to secure it for themselves. Investment in American commercial real estate surged a staggering 85% in 2015 alone. This is even before we take a look at the development of the different commercial lease types rising to the forefront.
A triple net lease is a particular form of lease agreement where the lessee agrees to pay the ‘three nets’. These are real estate taxes, building insurance and maintenance in one handy package, which can be a major boon for experienced buyers and new buyers alike. Investors in triple net lease investment offerings must be accredited, however, and must have a net worth of at least $1 million. This excludes the value of their primary residence (also known as $200,000 of income).
Certain properties are seeing a boost in attention, as well. The U.S. Census released data between December of 2014 and December of 2017 revealing that spending on hotel-related construction increased by nearly 60%. Office-related construction also increased by over 40%. By the time 2016 arrived over $70 billion worth of commercial buildings were put in place across the country, ranging from small studio spaces to large companies getting their start. When it comes to investing in commercial property, it’s never been a better time.
The five years leading up to 2017 saw demand for commercial real estate industry services growing, as well. This was aided by the recovery of the overall economy as well as shifting expectations for what investing in commercial property entails. Between 2012 and 2017 the industry saw an annual growth of nearly 4%, a promising amount for anyone interested in commercial rent and triple net leasing options. This is even changing how we look at energy conservation measures in new building construction.
Recent data provided by the Energy Information Administration data saw around 70% of commercial buildings being less than 10,000 square feet in total size. Office demand was also particularly strong in the third quarter of 2017, though a few different elements have contributed to this shift. Tight employment in office-using industries fueled a higher interest in accepting tenants, for one. The development of more environmentally aware and flexible office spaces is another contributor.
Investing in commercial property is investing in people. Whether it’s investing in triple net properties for new businesses or offering eco-friendly office spaces for workers, there’s always growth to look forward to in the dynamic real estate industry.