Is Commercial Real Estate Still Profitable in Today’s Market – YES!

Daily Real Estate News  |  November 27, 2007Commercial Real Estate Still Profitable Investment
So far, the softening in the real estate market hasn’t been felt in commercial property. There appears to be only a slight decline in 2007 vs. 2006.

Apartments have benefited from the still-high home prices and tightened mortgage-lending standards, although the increases have slackened slightly from 5 percent to 4 percent. Office properties are up 1 percentage point to 10 percent. Shopping centers are down 0.5 percent. Warehouses are up 4 percent and still in demand.

Over the past 12 months commercial real estate has returned an average 13 percent (property appreciation plus rental income), says commercial brokerage house Marcus & Millichap. That tops the 8.4 percent total return from the S&P 500 and the approximately 3 percent return from single-family homes.

Forbes magazine suggests that anyone interested in becoming a commercial landlord should ask the following questions before deciding how to go about it:

  • Do you want to invest on your own or in a group?
  • How much work do you want to put into your property?
  • Is a 1031 exchange worthwhile, or will fees eat up the delayed tax benefits?
  • Would you make more money buying a publicly traded REIT?

Source: Forbes, Dorothy Pomerantz (12/10/07)

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