Commercial Real Estate Investing: Industrial and Multi-Family Lead the Way

January 22, 2020 • Author: Howard Taylor
commercial-real-estate-investing

It’s no surprise… industrial and multi-family are the predicted front-runners for the 2020 commercial real estate market. But why is this? Many believe that investors favor industrial and multi-family projects because of their demand. Even in times of market volatility, these commercial real estate classes remain remarkably consistent – and consistency is always KEY! The simple rational for this consistency is due to a well-known economic term: supply and demand!

Let’s take a closer look, starting with industrial. The industrial real estate sector attracts a diverse range of buyers but is especially essential for brick and mortar brands and e-commerce contenders looking to leave a mass footprint on the online platform. Whether a company requires a heavy manufacturing site with very specialized machinery, a flex warehouse with multi-purpose use, or a technologically-sound distribution center, industrial real estate will thrive in 2020. Over the last year, industrial real estate has enjoyed sustainable growth in rent per square foot ($5.53 per square foot) with a 5.3% growth rate [1].

For retail giants like Amazon, the right industrial space is all about beating the competition; which is why these mainstream retailers are particular about their properties. In the 1990s, Amazon’s warehouse and office were in the same building. This Seattle space housed a handful of employees, one adorable dog, and many, many books. As time passed, this one warehouse became hundreds, and the type of commercial space Amazon needed evolved. Today, we know these spaces as fulfillment centers. Here, products are stored and distributed, ensuring that the customer can acquire an order quickly and efficiently. With this example, it is very easy to see how important industrial real estate is to a brand’s success… and investors are aware!

Multi-family properties are also a hot ticket commercial real estate item. Whether a fourplex, a garden apartment, or a high-rise condominium, investors taking the plunge into community housing will see big dollar signs. How? Multi-family real estate can multiple income with only incremental cost. In addition, these properties are typically easier to finance. At first glance, it may seem like getting approved for a single-family home would be the easiest way to go; but, that is simply not always the case. When it comes to multi-family properties, lenders trust these properties because of their ability to generate strong, consistent cash flow, every month. Also, with multi-family properties, growing a portfolio takes less time than other avenues of commercial real estate. These properties are very suitable for investors who want to build a large portfolio of rental units, in a short period of time. Food for thought: securing financing for a 20-unit apartment complex is a lot easier than 20 individual single-family homes. Want to hear another plus for multi-family investors? No longer are the days when apartment dwellers were viewed as less fortunate, lower class, or bad with credit. The numbers don’t lie. According to recent U.S. Census data, the annual increase in high-income renters - earning $150,000 or more is growing faster than owner-occupies homes, up by 175% from 2007-2017 [2].

Industrial and multi-family has certainly become the bread-and-butter for investors,” Mike Longo, SVP at CBRE, tells GlobeSt.com. “If you look at the best performing assets over the last seven years in terms of total return, the top performers have been triple net assets, followed by industrial and multi-family. The worst performers from a total returns standpoint has been office, hotels and retail.

Have questions about how to source the proper equity for Multi-family and Commercial projects? The Griffin Group can provide you with expert-level guidance and finance options to help you meet your investment goals.

Sources:

[1] Jones Lang, LaSalle. (2018, May 29). Industrial real estate market trends and outlook. Retrieved January 12, 2020

[2] Mallette, Cindy. (2018, March 12). Seven reasons high-income earners are choosing to rent versus buy a house. Retrieved January 12, 2020