Lucrative Commercial Property Investment: Office vs. Industrial vs. Apartment Real Estate
So, you’re reflecting on the past few months to see how far your bottom line has come. If you haven’t made significant gains financially, now may be a good time to get serious about expanding your real estate investing footprint. Or maybe it’s time to buckle down and develop a footprint in the first place.
The commercial real estate industry continues to show great promise for those interested in attaining their individual American Dreams. For instance, perhaps you want to retire early and retire well, or maybe you’d like to build an empire that you can pass down to future generations. Achieving your dream is certainly possible, but if you’re using real estate to do it, you need to know where to put your money.
So, which type of commercial investment real estate property should you pursue for your next investment?
Here’s a rundown on the differences among office, industrial, and apartment real estate investments and how to choose commercial investments based on your particular situation.
A Glimpse at Office Real Estate
Office real estate is usually categorized into a couple of types: suburban and urban. Suburban office facilities are typically smaller than their urban counterparts and can be found in office park environments (for instance, a medical office park). Meanwhile, urban facilities, which include high-rise buildings and skyscrapers, are present in cities.
An office commercial investment real estate building can feature a single tenant or multiple tenants. In addition, it can be classified as Class A, B, or C. A Class A building usually features cutting-edge systems and are designed for your premier office user—one willing to pay above-average rent. A Class B building usually features average rent prices and fair finishes. Meanwhile, a Class C building offers below-average rents and functional space for tenants.
Why Choose Office Commercial Investment Real Estate?
As you explore how to choose commercial investments, note that one of the main benefits of investing in office buildings is that these spaces have a tendency to provide a hedge against inflation. That’s because an office building has triple net leases, where regular rent increases are built into the leases. In addition, with triple net leases, your tenant will pay you not only rent but also repairs/maintenance, property taxes, and property insurance.
Another reason that investors embrace office properties is that they are among the types of properties with the greatest amount of bank financing available.
The main downside of this type of property is that when a tenant churns, you may need to heavily renovate the empty space to make it suitable for the next renter.
A Glimpse at Industrial Commercial Investment Real Estate
Industrial buildings are useful for housing tenants’ industrial operations and are typically found on the outskirts of cities, usually along core transportation routes.
Tenants may use industrial buildings to do heavy manufacturing or light product assembly. These types of buildings can also become distribution centers. Some tenants may additionally look for flex industrial properties, where they can take advantage of office space along with industrial space.
Why Choose Industrial Real Estate?
If you’re exploring how to choose commercial investments, a major reason to pursue industrial properties is that the capital requirements for these spaces tend to be relatively low.
On the flip side, the lower cost of entry for industrial real estate investing compared with other kinds of commercial real estate investing is making this market very competitive at the moment.
Still, like office buildings, an industrial property comes with triple net leases, so your tenants will assume responsibility for all expenses related to renting your property.
A Glimpse at Apartment Commercial Investment Real Estate
You can invest in various types of apartment buildings, such as high-rise or mid-rise buildings. High-rise buildings feature at least nine floors and one or more elevators, whereas their mid-rise counterparts feature fewer floors and only one elevator.
You can also invest in a garden-style apartment building erected in an urban, suburban, or rural location. Walk-up apartment buildings are also an option if you’re okay with owning buildings featuring 4-6 stories but no elevators.
Why Choose Apartment Deals?
A major perk of investing in an apartment is that these types of properties can be effortless to find. In addition, if you’re planning to seek funding through a bank, banks generally like lending on these types of properties. Plus, they’re wonderful generators of cash flow.
Many investors also like apartments because they offer the best portfolio diversity due to the high number of tenants you can have in one building. The industrial and office niches are riskier in this sense because they come with fewer tenants.
Additional Benefits of Apartment Commercial Investment Real Estate
A major appeal of apartment investment properties is that they usually come with limited risk. Why? For starters, high vacancy in apartment buildings is relatively rare. In fact, apartments offer the greatest growth prospects compared with industrial and office buildings because today’s dislocated homeowner is becoming a renter.
In addition, when tenants move out, you usually just need to add some fresh carpet and paint before you re-rent their units. Of course, in some situations, much more needs to be done, which can add up financially.
Start Mastering How to Choose Commercial Investments Today!
Now couldn’t be a better time to delve into the dynamic commercial investment real estate market and look for new revenue-generation opportunities. Understandably, though, you may be overwhelmed by the idea of having to choose among office, industrial, and apartment buildings for your next investment.
I can guide you through the process of selecting your future commercial real estate investments so that you avoid making costly mistakes. Get in touch with me today to learn how you can buttress your bottom line and enjoy new levels of wealth via commercial real estate in the years ahead.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.