What is Commercial Real Estate?
Commercial real estate is any property that’s used for business purposes and designed to produce income. That covers everything from office buildings and industrial warehouses to retail stores and shopping malls and multifamily apartment complexes. Commercial properties generate income in the form of rent paid by tenants and/or appreciation when the property is sold. Investors realize returns based on the property’s income—less any operating, financing and maintenance costs.
Top Nine Benefits to investors:
Commercial real estate has a long history of being an attractive investment vehicle during both up and down market cycles, and it represents an important role in an investor’s diversification strategy. Both domestic and international investors are looking to the U.S. as a safe haven to place capital as a strategy to both preserve their original investment and generate a positive return.
Investing directly in commercial real estate can potentially benefit individual investment portfolios in a number of ways. Here are the top seven benefits to investors:
- SUBSTANTIAL CURRENT INCOME AND SPENDABLE CASH* One of the biggest benefits to Commercial Real Estate Investments is that the assets are generally secured by leases which provide steady cash flow with income distributed to investors regularly (monthly, quarterly or annually), and significantly higher than typical stock dividend yields.
- POTENTIAL APPRECIATION OF ASSET VALUE* Commercial Real Estate Investments can deliver appreciation in value that potentially meet and exceed other investment types. Properties generally can go up in value from internal factors such as increasing rents or proactive management, and external factors such as supply and demand imbalances.
- LOW CORRELATION TO TRADITIONAL INVESTMENTS
Commercial real estate has exhibited historically low or negative correlation to equities, bonds and public REITs. Investing in real estate is a proven way to inject diversification into your holdings and choosing commercial properties allows you to add an entirely new dimension to your portfolio.
- LOWER VOLATILITY
The stock market can be unpredictable from month to month and year to year, while real estate has tended to be more stable. Since returns are derived from rental income in addition to price appreciation, commercial real estate often proves to be a more stable investment during periods of market volatility.
- INFLATION PROTECTION
Inflation erodes the purchasing power of money. But historically, commercial real estate has provided some protection against inflation. The ability to adjust rents over time is typically credited for real estate’s inflation-hedging benefits. Rent escalation clauses in many leases and organic rental growth provide a strong inflation hedge.
- ENHANCED RISK-ADJUSTED RETURN
Adding commercial real estate to stock and bond holdings can boost your portfolio performance and lower risk. A portfolio with commercial real estate has historically delivered higher returns with lower risk than a portfolio with only traditional asset classes. Bulit-in organic appreciation is a unique and exclusive feature to commercial real estate dose not apply to apartment complex.
- HARD ASSETS
Another unique advantage of commercial real estate investing is that it is backed by hard assets. Real estate is not the same as buying shares in a company that may be here today and gone tomorrow. Real estate is a hard asset that has meaningful intrinsic value. The property’s land has value, as does the structure itself. investors can benefit from the security of knowing that they own an asset that has the potential to earn income regardless of what happens to the existing tenant(s).
Another unique advantage of commercial real estate investing is providing sustainability for both Non-Cyclical & Cyclical industries.
- INTANGIBLE ASSETS OF OTHERS INVESTORS
Offer the opportunity to get paid for another investor intangible assets i.e Apple Santa Monica.
Investment with a plan.
There is no guarantee that real estate investments will achieve capital appreciation or provide regular, stable distributions