Now is “the most exciting and interesting time to be involved in commercial real estate”, according to the CBRE Global Real Estate Market Outlook 2017. The industry’s performance is steadily improving thanks to a number of positive factors:
- the global economy has mostly barred the shocks of the 2008 financial crisis and subsequent recession. Unemployment is down and all key CRE sectors are witnessing growing demand from both institutional investors, REITs (Real Investment Trusts) and high net worth individuals;
- moreover, all key CRE sectors “are in the process of reinventing themselves to accommodate technology-driven changes in business operations”.
What are the major investment properties, or CRE markets?
- Industrial real estate: factories, warehouses, plants, etc. In 2018, the industrial segment is expected to be one of the most dynamically expanding.
- Multi-family real estate: apartment buildings rented out to a variety of tenants both short and long term.
- Hotels but also resorts, motels and the like. Airbnb accommodation excluded.
- Office space: all kinds of office facilities and parking space.
- Retail space: shopping malls, restaurants, storefronts, venues etc.
Who are the key market players?
The major parties are commercial brokers, landlords and tenants. In addition, as the property progresses through the leasing life cycle, other parties become involved: banks, appraisers, third-party auditors, escrow agents, government agencies, etc.
Who invests in CRE?
The largest sources of ownership in most CRE markets are:
- institutional investors, e.g. public and private sector pension funds, endowment plans, insurance companies, wealth managers, asset managers or superannuation schemes;
- REITs, joining a REIT is the easiest way to invest in CRE;
- private equity as well as investments from high net worth individuals.
While investing in CRE requires more knowledge, experience and capital, it also provides a more stable income in the long term, compared to the residential sector.