5 Best Commercial Property Investments To Unleash Your Wealth

Real estate investing has always been the best way to make money. More so, discovering the untapped potential of commercial property investment makes it an even more lucrative choice for building wealth. So, if you're interested in making a commercial real estate investment but are having trouble finding a commercial property to buy as an investment, this guide is for you. 

In this article, we will explore the top 5 best commercial real estate investments that can help you achieve your financial goals. From office buildings and retail properties to industrial complexes and multifamily properties, commercial real estate offers diverse investment options to tap into. 

Whether you are an experienced investor or a beginner, commercial real estate investing takes time, research, and proper planning. This article will provide you with valuable insights and expert tips to make informed decisions about the best commercial real estate investments.

What Is Commercial Real Estate Investing?

Commercial real estate investing is the practice of acquiring, controlling, and managing properties that are used for business, such as office buildings, retail establishments, industrial warehouses, hotels, and residential complexes, to create income and accumulate wealth. 

Investing in commercial real estate often entails purchasing assets that are leased or rented to organizations or people who use the property for business reasons. The primary objective of commercial real estate investing is to generate rental income and potentially earn profits through property appreciation, which is the increase in the value of the property over time.

Commercial property investment can be done through various investment vehicles, such as direct ownership of properties, partnerships, real estate investment trusts (REITs), and real estate syndications. It requires careful analysis of market trends, property valuation, financing options, and commercial real estate property management strategies to mitigate risks and maximize returns. 

The 5 Types Of Commercial Real Estate Investments

Successful commercial real estate investing often involves a combination of financial acumen, market knowledge, and risk management skills. If you lack any of these, make sure to master them before venturing into the top 5 best commercial real estate investments below.

1. Office buildings

2. Retail properties

3. Industrial real estate

4. Multifamily properties

5. Other commercial real estate investments

1. Office Buildings

Although Covid-19 appears to have altered the business world's dynamics, office space is still the most typical sort of commercial property investment. Today, it appears that working remotely has replaced working from an office. The trend in office development has seen a downward movement, leaving so many office spaces vacant worldwide, but recent reports indicate that demand is gradually picking up.

Notwithstanding the downtrend, investing in office space is considered the most risk-free investment in the commercial real estate market. Considering that it may be able to provide several advantages, including rental income cash flow, potential tax benefits, investment portfolio diversification, protection from inflation, and long-term wealth creation.

Office buildings are classified into three categories: 

• Class A offices: Class A offices are high-quality, premium office spaces located in prime locations with excellent amenities and services. They are typically newer or newly renovated buildings with modern architecture and state-of-the-art infrastructure.

• Class B offices: Class B offices are mid-tier office spaces that are older or have fewer amenities compared to Class A offices. They may require renovations or upgrades to meet modern standards, but they are still functional and offer decent quality.

• Class C offices: Class C offices are typically older or outdated spaces with limited amenities and services.  They may require significant renovations to meet modern office standards and may have functional or aesthetic issues.

Tips for maximizing return on office space investment 

• The location of your office space is crucial for maximizing returns. Choose a location that is convenient and accessible for your target audience, employees, and business partners.

• Invest in upgrades and keep your office space updated and well-maintained to attract high-quality tenants and command higher rents.

• Conduct thorough market research and stay informed about the local real estate market trends, demand, and rental rates in your area.

• Efficient property management is crucial for maximizing returns on your office space investment. Hire a professional property management team. 

2. Retail Properties 

Retail properties are a popular type of commercial real estate investment, leased or rented out to businesses engaged in the sale of goods and services directly to consumers. Shopping centers, strip malls, standalone stores, and other retail spaces are all included in these properties. 

Buying commercial property for investment purposes, including retail properties, can be a lucrative opportunity for those looking to invest in commercial real estate. Retail properties are typically located in highly populated areas, ranging from banks and restaurants to strip malls and neighborhood shopping centers. 

The demand for prime retail locations generates higher rental income compared to other commercial properties. Despite their popularity, retail property investments have experienced several market slumps in recent times due to cyclical market slumps and long-term shifts in how people work, live, and shop. 

This is a result of the growth of e-commerce and remote work, which are decreasing the need for office and retail space. Commercial real estate investing for beginners requires careful consideration of market trends and shifts to maximize returns on retail investments.

Tips for maximizing return on retail investment 

• One of the most important factors in maximizing the return on retail investment is location. Choose a location with high foot traffic, good visibility, and accessibility.

• Use marketing and promotional strategies to attract customers and increase sales. Consider running sales, offering loyalty programs, and using social media to engage with customers.

• Negotiate favorable lease terms that protect your interests and provide a stable source of rental income. Consider factors such as rent escalations, tenant improvements, and lease renewal options.

• Maintain the property to ensure that it remains attractive to customers and tenants. Keep the property clean and in good condition, and make repairs promptly to prevent damage from worsening.

3. Industrial Real Estate 

Warehousing continues to be the driver of commercial real estate investments. The trend of warehousing is currently on the rise due to the growth of e-commerce and online shopping. With more and more consumers purchasing products online, there is a greater need for warehouses to store and distribute these products. 

This has led to an increase in demand for industrial real estate, including warehouses and distribution centers. Additionally, the pandemic has accelerated this trend as more consumers turned to online shopping during lockdowns and restrictions. As a result, the warehousing industry is expected to continue to grow and expand in the coming years.

Tips on industrial real estate investments

• The location of the industrial complex is a critical factor to consider. A property situated near transportation hubs and major highways will be more valuable and in higher demand. 

• The creditworthiness of tenants is another essential factor to consider when evaluating industrial complex investments. 

• Lease terms play a critical role in evaluating industrial complex investments. Long-term leases provide stability and reduce the risk of vacancy. 

• The physical condition of the industrial complex is an essential factor to consider. Dilapidated buildings or those requiring significant repairs and maintenance will impact the property's value and increase operating costs.

4. Multifamily Properties

Investing in multifamily properties can be a great way to earn passive income and capital gains. These properties, also called apartment buildings, provide separate living units for multiple families within a single complex, ranging from small buildings with a few units to high-rise complexes with hundreds of units. 

One of the benefits of commercial property investment in multifamily properties is the ability to generate cash flow through rental income. Furthermore, these properties can appreciate over time, providing investors with the opportunity for significant capital gains.

Multifamily properties can be broadly categorized into two types: 

• Apartment buildings: Each unit in these structures is rented out to tenants and is normally owned by a single party. The landlord is responsible for maintenance, repairs, and property management, which can be a significant cost and time commitment.

• Condominiums: On the other hand, condominiums are owned by individual unit owners who live in the unit or rent it out. The owner of a condominium unit is responsible for the maintenance and repairs of the unit itself.

Tips on multifamily property investments 

• It is crucial to study the local market conditions, such as population growth, employment rates, and rental rates. Look for areas with high demand for rental properties and low vacancy rates.

• Evaluate the current property management team's experience, track record, and ability to maintain the property's condition and keep tenants happy. 

• Conduct a thorough inspection of the property to identify any necessary repairs, renovations, or upgrades. Factor in these costs in your investment analysis.

• Evaluate the property's cash flow potential by analyzing the rental income, expenses, and potential for appreciation. Look for properties that offer steady cash flow and long-term appreciation potential.

5. Other Commercial Real Estate Investments

In addition to retail and multifamily properties, there are other potential commercial real estate investment opportunities to consider. One such opportunity is hotels, which can offer high yields and provide a steady stream of income through their operations.

The demand for hotel rooms can fluctuate based on factors such as location, seasonality, and economic conditions. Therefore, investors should carefully evaluate market conditions and potential revenue streams when considering hotel investments.

Mixed-use properties are another real estate commercial investment opportunity that combines residential and commercial spaces in a single property. These types of properties can include a combination of retail, office, and residential spaces. The advantage of mixed-use properties is that they offer diversification of income streams and can attract a wider range of tenants. 

However, commercial real estate investors must carefully evaluate the market demand for each type of space within the property and ensure that there is adequate demand for both residential and commercial spaces.

Pros and Cons of Investing in Commercial Real Estate

It's critical to fully comprehend the benefits and drawbacks of investing in commercial real estate in order to make the investment choice that is best for you.

Pros 

1. Potential for higher returns: Due to the possibility of rental income and property value growth, commercial real estate investors might yield larger returns than other types of investments.

2. Diversification: For investors looking to diversify their portfolios beyond conventional investments like stocks and bonds, buying commercial property for real investments can offer a chance.

3. Control: When you invest in commercial real estate, you have more control over the investment because you can manage the building, choose the rent, and make renovations.

4. Tax benefits: Property taxes, mortgage interest, and depreciation can all be written off for investors in commercial real estate.

Cons:

1. Higher initial investment: Compared to other investment choices, commercial real estate investments often need a larger initial commitment, which may not be possible for all investors.

2. Volatility: The commercial real estate market can be volatile, with fluctuations in rental rates and property values.

3. High transaction costs: High transaction expenses are sometimes associated with commercial real estate deals, including broker fees, appraisal fees, and legal costs.

4. Property management: Investing in commercial real estate requires continuing property management, which can be time-consuming and necessitate hiring a property management company.

Conclusion 

Investing in commercial real estate can be a great opportunity for beginners to diversify their portfolios and generate income. However, it is important to conduct thorough due diligence before investing. As a beginner, you should evaluate the potential for rental income and appreciate its value over time. Location is also a key factor to consider, as are market conditions and the financing options available. By taking these factors into account, beginners can make informed decisions and maximize their return on real estate commercial investment.