Commercial Property Investments: What’s Hot, What’s Not Moorhead MN

With residential real estate in a slump, many investors are searching for other alternative investments to help offset potential losses in their investment portfolios. Other investors are seeking to take advantage of a weakening economy and high foreclosure rates. Commercial properties are a popular choice, as they can carry much bigger payoffs than residential properties.

Researching commercial real estate is an essential step to take before deciding what and where to purchase. With hotel, office, retail, multifamily and industrial real estate markets and industry reports to wade through, the research can be overwhelming. Knowing how to use reports and numbers to inform potential purchases is a critical step in becoming an informed investor. The following research covers the United States commercial real estate and factors that influence market performance.

 A brief history

Similar to the nature of residential real estate in the late 80s to early 90s, overbuilding and high interest rates caused a stagnant market. The majority of commercial properties were owned by a small percentage of individuals and corporations. While it may seem wise to sell to make a profit or recoup losses, the tax benefits worked in their favor—empty properties provided excellent tax write-offs. Laws eventually changed and properties sold quickly on the open market, making sellers very wealthy. The U.S. economy also flourished during this time and rental rates increased at a steady rate. From the mid to late 90s, commercial real estate boomed.

The technology sector was a large contributor to the healthy market conditions. In 2000 when the industry fizzled and left stock market investors empty handed, those companies that declared bankruptcy also terminated their commercial property leases. Vacancy rates skyrocketed seemingly overnight. The market made a fairly quick recovery in 2001 as vacancy rates declined at a moderate rate. Since then, commercial vacancy rates nationwide have remained low. 2007 reminded property owners that fluctuations occur. In April, for the first time since the Moody's/REAL Commercial Property Price Indices (CPPI) began, commercial real estate prices recorded their first year-on-year decline, dropping 2.8 percent compared to April 2007. However, the CPPI shows that commercial real estate prices have increased 9.1 percent in the past two years. 

Conclusion: Commercial real estate is affected by businesses in that particular industry. Following is a brief rundown of what is happening on a national level.

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