Commercial real estate is a growing market, but it is naturally hotter in some areas than in others. Savvy investors know that buying in a hot market takes finesse and skill, and that nothing is a given. It means paying a bit more in most cases, but it also brings the potential of a bigger return on investment in the long term. Of course, the market could also change and reduce some of that long term gain, which has to be considered. Here’s an overview of commercial real estate markets that are currently on the radar of many investors.
To begin, here’s a quick overview of what makes a hot market hot. These traits include a growing base of people and businesses, along with a lower number of buildings that suit needs. This puts the good buildings in demand, and investors who own those buildings have a better chance of selling them or renting them at premium prices that will be well worth the effort to acquire.
Hot markets are places where people want to live and work. A common misconception is that this means only larger cities or the suburbs of those cities can get on a hot streak. This is not always the case, though, as some smaller locations can be excellent areas for the growth and development of commercial real estate investing and those hidden gems may be where investors find most of their success.
The San Francisco Bay Area, Richland, WA, and Boston, MA are the most significant locations when it comes to the growth of commercial real estate. Colorado Springs, CO, and Columbus, OH are also rising in the ranks of hot real estate markets, according to statistics provided by the National Association of Realtors.
While the Bay Area has almost always been a hot market, places like Columbus are less expected when it comes to valuable commercial real estate. But there is growth taking place in Ohio, and in Colorado, and it doesn’t look like it is going to slow down in the near future.
While some markets seem to be performing very well, the commercial real estate market will eventually reach a peak and then take at least a partial downturn. According to Morgan Stanley, that peak will be reached by the end 2017, as the national market is already showing signs of cooling off.
This is, of course, only a prediction. The peak of the market may or may not actually occur in 2017, but there are reasons to think that the prediction may be true or at least relatively close in timing. With that in mind, investors should consider the value of holding onto current investments and the timing of any subsequent purchases.
The idea of an up-and-coming market can be tantalizing to commercial real estate investors, but it is important to consider that the market may not make the growth that is expected or predicted for it. The upside is attractive, to be sure, but the odds and impact of a miss should not be ignored.
Rather than take the risk of losing in a market that could be reaching its peak, investors may want to stay away from these types of markets for now. If they decide to explore these types of markets, cautious investments and careful research are more important than ever. Some may find it safer to wait and see if markets reach their predicted peak this year.
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