Commercial Real Estate to Remain A Preferred Choice for Investors
Despite suffering setbacks during the pandemic in 2020 and 2021, the commercial real estate industry has a positive outlook heading into 2022. Hence, commercial properties such as offices, retail, warehouses, etc., are safe assets to bet on as they can be a source of recurrent secure rental income.
Offering a consistent income stream, attractive risk-adjusted returns, and portfolio diversification option, there are some key factors which underpin commercial real estate investment as the most advantageous investment option.
A particularly attractive feature of investing in commercial real estate is the stable source of high rental income, generated from long-term (ranging between 3 and 10 years) secured leases. Average rental from housing is 3-4% while commercial properties render yields ranging between 8-12%.
Additionally, the long-term agreements allow for future financial planning and certainty ensuring total security during both boom times and burst cycles.
In the commercial space, other subcategories including retail and warehousing are also climbing up the curve and piquing investor interest.
Commercial properties are often occupied by established businesses who respect and take care of their rented premises reducing the admin and management burden.
It is a hedge against inflation and their values have, historically, appreciated at a greater rate than inflation.
Since the appreciation of commercial real estate investments has been robust (outperforming other forms), it provides investors an option to use their assets as leverage.
Intermittent profits can be difficult to come by in today’s ever-changing world where many things may go up while others stay stagnant. Commercial real estate investment allows for lessening of risks and increases earning potential. The stability of the investment provides protection against market volatility, as well as adding diversification to a portfolio that does not go up or down with other financial assets like this type typically does. The benefits far exceed any drawbacks because they can be invested safely without worrying about losing capital gains.