Real estate investment has always attracted the investors for various reasons, be it residential or commercial sector. After the reopening of the offices post pandemic, the commercial real estate industry is gaining grounds. It is performing exceptionally well and now, one can rake more in commercial investment. Commercial properties are now considered to be a safe bet and one can rake rental income from this investment. Any real estate which is used to carry out business comes under the banner of commercial real estate.
1. Commercial Sector Garners Prominence
A major part of the workforce is back to the offices, though a few are still working from home. The IT companies, the start-ups which are actively in search of workspaces and the e-commerce that is boosting the warehouse demand, has together boosted up the commercial investment. The usage of high level technology in the commercial spaces by many reputed builders is attracting many real estate investors into the commercial investment. They understand that investment in commercial segment can help them rake more. Commercial investment is now becoming the preferred choice of many. A lot of flexibility is seen in commercial real estate sector.
2. Rake More in Commercial Real Estate
As we all know, real estate investment is a long term investment and nowadays, commercial real estate investment is getting prominent for various reasons. One can rake more by investing in this segment. Since the investment in this sector involves a considerably large sum of money, it becomes a bit tedious for a single retail investor. Hence, Real Estate Investment Trusts (REITs) and fractional ownership comes into play. These are the usual ways of commercial real estate investment. With these, commercial real estate investment is reachable to ordinary investors as it reduces the size of the ticket.
One can rake more with commercial real estate investment due to various reasons. Being real estate, it is not affected by price fluctuations and its market is not volatile. This investment has a proper lock-in period that protects and shields the investment and also guarantees the returns. In addition to that, the commercial property which is in a strategic location is basically a gold mine as it is widely valued by a particular section of renters. The investment in such locations will continue to pay off as a passive income stream and one can rake more from such commercial real estate investment.
3. Methods of Investing in Commercial Real Estate
No doubt, the big shots can invest in the commercial sector individually but it is not the cup of tea for all investors. There are two methods of investing in commercial real estate which are highly preferred by those investors who cannot buy the commercial assets individually.
3.1. REITs
This abbreviation stands for Real Estate Investment Trust which is basically a company that owns, operates or finances income-producing real estate. It gives an investment opportunity and anyone can invest in portfolios of real estate properties in the same way as one invests in any other industry. One can invest through the purchase of individual company stock or through a mutual fund or exchange traded fund (ETF). The investors in REITs will enjoy the share of the income produced without actually purchasing the commercial asset and even without taking care of the property.
3.2. Fractional Ownership
In this method of investment, a group of like-minded investors pool in their funds to purchase a commercial property. Each investor owns a fraction of the property, that’s why the name fractional
ownership. Here the size of the ticket is small, though in multiples of lakhs. Usually the minimum ticket will be for 25 lakhs. The income obtained from such pooled investment will be divided among the investors as per their share or proportion of investment. Fractional Ownership allows the investors to diversify and invest in multiple properties in different locations.
4. Where to Invest In Commercial Sector
For ages, real estate has been considered to be one of the most resilient and strong asset. Here, the prices of properties don’t keep changing on a daily basis. It is the most trusted source of investment and since investment is in bulk in the commercial sector, the returns will also be appreciating. Commercial sector is a constantly growing market which houses businesses, retail and office spaces. Below are mentioned the types of commercial real estate.
4.1. Commercial Multifamily Real Estate
Any income generating property that is used for residential purpose is said to be Commercial Multifamily Real Estate. Though the property serves as a residence but the main purpose of this asset is investment for rental income. It should have more than one residential unit to be counted as a Multifamily. One enjoys multiple streams of income from multiple units and gets a chance to rake more.
4.2. Office Spaces Real Estate
The office buildings and the offices are categorized into different types based on the size of the structure. Whatever be the size, they fall under the commercial sector of real estate and hold a good demand for its multi-tenant capacity. Getting tenants for office spaces is not at all a task nowadays. The office buildings are also grouped into different categories based on the location of the building and the health of the surrounding market.
4.3. Industrial Real Estate
It is pretty much easy to enter into Industrial real estate due to its low entry cost and flexibility. As the name goes, this type of assets, includes, spaces that accommodate industrial activities, including production and manufacturing units for businesses. Various other types are also included in Industrial real estate like bulk warehouse, flex warehouse, heavy manufacturing, light assembly, cold storage, showroom, etc.
4.4. Retail Real Estate
The word clearly indicates that these businesses deal directly with the customers. Retail real estate assets are centrally located in the heart of the town, to be more accessible to customers. This category includes community retail centres, power centres, regional malls, neighbourhood shopping centres, and more.
4.5. Hospitality Real Estate
Again, this category goes with the meaning of the word. The real estate that is used to serve travellers and people looking to unwind, falls in this category and includes, budget hotels, extended-stay hotels, full-service hotels, limited-service hotels, short-term rentals, etc.
Written by Nikhil Gattu
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Written by Nikhil Gattu
