Commercial Property Investment to yield rich dividends
Investment in commercial real estate space, which had plummeted following the economic slowdown, has again started to gain momentum. This sector, a major indicator of the economy’s health, was caught in the throes of the economic slowdown since 2008. Following the slowdown, prices of commercial property that had peaked in Q3 2008 tanked by 30-40% across the country between 2008 and 2013.
Commercial investment options
According to realty experts, prices have bottomed out in most cities and a revival in the sector is round the corner. This presents an ideal opportunity for prospective investors in commercial realty space with a high net worth to invest in the market. For an investor currently entering the market, there are four different commercial investment options that he can try out. Firstly, he can directly buy a commercial property. Secondly, he can buy shares of a commercial developer. Thirdly, he can invest in funds focusing on commercial property. Fourthly, he can invest through Real Estate Investment Trust (REIT) which is gaining popularity in recent times and may soon become a reality.
Reasons to invest
Why should one invest in commercial real estate now?
It is considered to be an opportune time to invest in commercial realty now because compared to residential realty one can expect higher returns. While the annual returns expected from residential realty is about 2-4%, investors in commercial realty can currently expect returns between 9-12%, especially in major cities. There is also a huge growth potential for commercial office space across all major cities. Moreover, there is bound to be considerable capital appreciation for commercial property due to price correction. Correction in prices between 50-80% of the peak prices in 2008 is expected.
Possibilities for investment
Many developers who had constructed larger office space units are now dividing them into smaller space units. Hence, an investor can now look at buying an office space between 500-1000 sq. ft. This is indirectly bringing in more categories of buyers into the fray. Professionals like doctors, lawyers, stock brokers and chartered accountants are investing in such units across the country. Besides this category of investors who are investing in commercial space for their own use, there are two other categories of investors. One represents senior executives or corporate professionals who intend to invest in start-ups and do something of their own. The other represents investors who wish to invest in commercial property with the objective of a steady rental inflow.
Developer initiatives
To move with the changing times, developers are also coming up with innovative measures to offload their stacked up inventory. The latest state-of-the-art technology is being incorporated into their projects to make them more appealing to investors. Emphasis is placed on security as well as environment- friendly “green” components with features and facilities that match international standards. Some of the features incorporated in such commercial projects are provision for valet parking, water harvesting, zero waste disposal, sewage treatment plants, access control to individual spaces, under-car scanners as well as elevators and other facilities that work on artificial intelligence.
Future Prospects
Due to the turnaround expected in the commercial real estate market there is bound to be a positive investor sentiment with regards to investing in commercial property. Besides, the success of many start-ups and smaller companies, operating from limited office space would also propel a positive investment climate in the immediate future. This, along with the expected change in political and economic conditions of the country is likely to spur growth in the commercial real estate sector across the country.
