The New Year is always a good time to consider new opportunities. If you have been thinking about investing in commercial real estate for the first time or expanding your current portfolio, 2020 could be a good year for you.
CBRE’s 2020 U.S. Outlook predicts a very good year for commercial real estate stating, “Resilient economic activity, strong property fundamentals, low interest rates and the relative attractiveness of real estate as an asset class are the primary factors supporting our outlook. Barring any unforeseen risks, we assess that a recession will be avoided, thanks in large part to the stimulatory effects of the Fed’s rate cuts in 2019.”
Here are a few things to know when investing in commercial real estate in 2020:
Relatively Low Risk
While all investments carry some degree of risk, real estate investments tend to be a lower risk relative to the rate of return. Within the commercial real estate space, there are varying degrees of risks. For example, renovating and flipping a property will involve more risk than acquiring a shopping center with historically stable cash flow. It is important to work with a broker who understands the local market and can help you find a property that fits your needs.
Programs like the 1031 Exchange and Opportunity Zone Program have tax benefits for investors. Work with your real estate agent and financial advisor to determine what investment opportunities and tax benefits are available to you.
Commercial Real Estate Sectors
As you know, there are several different property types you can invest in. The outlook for investing in commercial real estate in 2020 looks strong across several sectors including industrial, office space, retail and multi-family. As previously mentioned, when looking at investment properties, it is important to work with real estate professionals who have a depth of knowledge in the local market and understand economic trends.