Although the future is bright for commercial real estate, some are still wary about the industry because of the misconceptions that revolve around it. Below are 7 common misconceptions about commercial real estate.
1. Commercial real estate will immediately make you wealthy
Like with most investments, generating profits doesn’t happen overnight. When you invest in commercial real estate, there are various things that you might need to complete before you start bringing in revenue. For example, if you buy a multi-family property, it may need renovations before you begin accepting tenants. The longer the units in the property remain vacant, the longer it will take to start bringing in income from rent. Not to mention, it can take a long time to find tenants.
2. There is little or no risk with commercial real estate
Commercial properties tend to offer more financial reward than residential properties such as single-family homes. However, investing in commercial real estate is often riskier than investing in non-commercial real estate. Since commercial properties are sensitive to economic conditions, the stronger the economy, the higher the demand and price for commercial real estate. In the case of an economic downturn, business owners renting out offices may choose to operate from home. If you own an office building and this happens, you can lose significant revenue.
3. Commercial real estate is easy to manage
Once you’ve purchased commercial property, your work isn’t done. In fact, if you choose not to outsource commercial real estate management, you can expect to handle everything on your own from performing maintenance to resolving emergencies. Due to these complications, it can be difficult to manage commercial real estate. This is especially true if you own multiple properties.
4. Commercial real estate takes too much time and money
Because most commercial properties require large capital investments, many people think these transactions are too expensive for them. However, several banks and lenders are willing to offer financing. In fact, many private lenders are more willing to give out loans for commercial real estate because it has a potential for greater profit and can bring in more stable, recurring income.
Also, managing a commercial property doesn’t have to be time-consuming. By hiring a management company that handles various tasks such as answering calls, dealing with complaints, overseeing maintenance and finding tenants, you can save lots of time.
5. You can hardly find good deals
It can take a while to find the best commercial real estate deals, but if you know what to look for, you just may find a property with great income potential. Therefore, the common belief that you can hardly find good deals is false. You just have to know the best places to look.
6. E-commerce is banishing brick-and-mortar retail
Some people think that because e-commerce stores have exploded in popularity, brick-and-mortar retail is no longer prevalent. This is simply not the case. Brick-and-mortar sales make up 94% – almost all – of the total retail sales. Also, 49% of Americans prefer to shop in physical stores. These stats show that brick-and-mortar stores are still alive and well. They likely aren’t going anywhere anytime soon.
7. Suburban locations are unattractive
Urban locations have been popular for commercial properties for quite some time, due to lower costs, walkability and access to public transportation. But if suburban locations can replicate these conveniences by providing access to highways or to transit, they can have the same appeal and success.
At Berger Commercial Realty, our aim is to help commercial property owners maintain, manage and maximize the profits of their buildings with our leasing and property management services. Contact us today to learn more.
About Berger Commercial Realty/CORFAC International
Berger Commercial Realty/CORFAC International is a regional, full service commercial real estate firm based in South Florida. Independent and privately owned since its founding in 1998, the firm is a member of CORFAC International, a global network of independently-owned commercial real estate brokerage firms. The firm’s property management and brokerage services include tenant/landlord and buyer/seller representation; project and construction management; receiverships; agency/project leasing; capital advisory/investment sales; retail services and more. For more information, visit www.bergercommercial.com.
About CORFAC International
CORFAC International (Corporate Facility Advisors) is comprised of privately held entrepreneurial firms with expertise in office, industrial and retail real estate leasing and investment sales, multifamily property acquisitions and dispositions, property management and corporate services. In association with global affiliates, CORFAC International has 60 North American offices and 20 offices in global markets. Founded in 1989, CORFAC firms completed more than 11,000 lease and sales transactions totaling approximately 500 million square feet of space valued in excess of $8.5 billion in 2015. For more information on the CORFAC network, call 224.257.4400 or visit www.corfac.com.