Challenged by rising interest rates, a sometimes staggered economy, and empty office space buildings, commercial real estate (CRE) investment has become a game for the haves and the have-nots. If you have cash, there are opportunities across the country, and if you’re looking for funding, there are still some deals out there if you’re counting on rates dropping later.
The value-added strategy is always popular, whether it’s office space, commercial, or a warehouse. The real value comes when interest rates go down and first-time developers get in. Unfortunately, because the rates are higher, a lot of people are trying to get out, so that’s where someone with cash who understands the market steps in and gives them that out. Single-use properties, which are less risky, are also being sought after. If they find a tenant, they proceed, and if not, they can easily back out. A single stand-alone property like a warehouse or industrial site with a single tenant has the potential to double investment.
Despite the presence of empty office space, there are still deals to be found. If you can get a good deal and have a good team in place, there are still companies willing to occupy them. Transitioning to residential or mixed-use properties depends on obtaining zoning relief. Apartments can be a profitable option, but only if the municipality allows for it. Certain locations offer land and buildings for nothing, while in others, potential rents make the investment worthwhile.
The warehouse and industrial sectors are outperforming all others in the CRE market. Warehouses are being built everywhere, but the expectation of securing Amazon and FedEx as tenants has not materialized.
In Philadelphia, various property types are in demand. Warehouse and industrial spaces, as well as single-tenant buildings, are in high demand. Some clients are also buying office spaces but with specific-use in mind and companies ready to move in. Investors are not buying properties solely to enter the market.
In summary, CRE investors with cash continue to bet on interest rates coming down. They see value in the current market conditions and opportunities in different property types such as warehouses, single-use properties, and specific-use office spaces. Despite the challenges, there are still deals to be found, especially when considering potential future corrections and market fluctuations.
Source: Gillett News