A Positive Outlook for Commercial Real Estate Investment

A report in The Wall Street Journal estimated that an average individual looking to retire needs about 85% of his current annual income, and a large number of Americans are likely to fall short of this target. Investments in stocks and bonds through the 401k funds were hit badly, thanks to the stock market crash. That probably explains the surge of interest in real estate IRA through self direct IRA. But is real estate investment a good option? Yes, provided you are willing to do it with care and consideration.

There was once a time when real estate was the golden goose that promised safe returns and an ideal path to retirement. But the economic downturn that spared none, managed to engulf the real estate market as well. A recent report has indicated that of all real estate options, the multifamily sector continues to perform well, despite the volatility that has hit financial markets. Multifamily units continue to remain a popular commercial real estate investment option for people looking for safe investment options.

This seems logical, because an independent study by the Harvard University’s Joint Centre for Housing Studies has found that about 39 million households continue to live in rented accommodations. While the great American dream of owning a roof over their head may not have gone bust, it certainly is stalled for the moment. The report states that about 78 % of people under the age of 25 are renters, while about 65 % of people in the age group of 25-30 choose to live in rented accommodations. This trend is likely to continue until the job market shows signs of improvement. With employment rates remaining abysmally low, this doesn’t seem likely in the near future.

The report also indicates that rents for commercial properties continue to rise at a modest, yet steady pace. In fact, occupied commercial space has risen by about 12.6 million sq. ft. since the beginning of 2011*.

Unlike stocks and bonds, the real estate market isn’t volatile. Of course, it is susceptible to corrections, but it’s almost never instant. There’s always enough time for people to evaluate their investments. More often than not it’s greed that leads to losses.

It could also be a result of wrong guidance on the part of the real estate investment broker guiding the investor. A professional and experienced wealth management company can predict market trends and hence warn the investor about possible downturns. But if the investment broker has his sight on short term gains, this seems unlikely.