Following COVID-19, the real estate market has faced some tough times. Still, if you want to diversify your portfolio and look for higher capital returns, the commercial real estate sector represents a better opportunity as some renewed demand has returned to this asset class.
With prices bottoming out, we are entering a period where interested investors in commercial properties can return to the market and look for ways to maximise their return. The segment as a whole faced headwinds due to an abrupt stop to office use due to a global crisis. Still, with global offices gradually reopening, the demand recovered far more quickly than anticipated.
The dip in demand stemming from work-from-home policies by the companies will rebound through the growing demands from sectors such as e-commerce, healthcare, and information technology shortly. While it may seem like a challenge, a low vacancy level should remain in balance and range-bound going forward, according to real estate experts.
Residential real estate has experienced difficulties in the past few years, however, commercial real estate has been on the rise. During the pandemic, the commercial real estate sector was very resilient, experiencing either a small decline in rental income or a large sell-off of assets. The sector has continued to exhibit significant momentum and should continue to pull through the downturn, while providing a good long-term investment for investors.
Let’s look at the reasons, why should you invest in commercial real estate. 1. Strong Income Potential
Perhaps the most obvious reason for investing in commercial property is income. Of course, commercial tenants generally sign leases for much longer - typically three years at a very minimum, but sometimes up to ten years. This naturally lends itself to more solid income. Furthermore, if done right, these types of properties usually give significantly higher annual returns on investment - sometimes even double or triple the annual returns from residential rentals.
Essentially, it is not just commercial property that provides this potential benefit; even a pre-leased property in a prime location will provide rental income almost immediately from day one, so there is virtually no risk of vacancy and reassurance for the investor. 2. Success of REITs
Growing enthusiasm for real estate investment trusts (REITs) mirrors the worth of commercial real estate. REITs allow individuals to co-own larger assets like office buildings and malls without having ownership, and provide returns on a regular basis.
REITs have delivered relatively stable cash flow and appreciation consistently in the last decade. It's been a sign of a healthy real estate market. In India, commercial real estate has complying investor interest from various institutions and regulatory support.
Whether through REITs or owning assets directly, commercial property remains a legitimate and attractive asset class for both institutional investors and retail investors. Commercial property is seen as stable, income earning and a growth sector to invest in for the future. 3. Diversified Investment Portfolio
It is crucial for investors to diversify their portfolios to reduce risk. Commercial Real Estate can act as a hedge against volatility in other markets, sometimes those of stocks or bonds. Investing in a combination of Commercial Properties - with office buildings, retail shops, and showrooms in multiple, different sectors and locations will collectively reduce levels of risk while contributing to maximizing performance of individual assets.
RES Management provides many commercial opportunities for investors, including office spaces for sale and ground floor showrooms, which are ideal for investors needing diversification and scalability. 4. Tangible Asset with Intrinsic Value
Unlike stocks or mutual funds, commercial property is a physical asset that can be managed and even viewed. In addition to the building itself, there’s land that has intrinsic value, which makes this a more secure investment.
Demand for great commercial space in good locations in growing urban areas supports the maintenance (and often increases) of worth. The economy of India is rapidly urbanizing, and in commercial properties in Ahmedabad are gaining the potential of the rapid growth. 5. Appreciation Over Time
One of the long-term benefits of investing in commercial real estate is the appreciation of the property. As cities grow and infrastructure develops, the value of your commercial asset can exponentially grow in value.
Additionally, with proactive upgrades, tenant improvements, and improved property management you can add even more value.
RES Management as a trusted commercial real estate broker not only helps you find undervalued opportunities and ensure professional property management to leverage your appreciation potential. 6. Leverage Tax Benefits
Real estate allows leverage, which means you can buy a valuable asset using a small portion of capital with the rest borrowed. You could earn a higher return on equity.
Also, commercial property investors may have tax advantages related to several different aspects it may depend on the kind of commercial property, depreciation, mortgage interest, capital gains tax breaks, etc. You can get help from a knowledgeable commercial property dealer to know how your commercial properties could be structured to maximize your finances and tax benefits.
Final Say
When you’re investing in commercial real estate, it’s not only about simply purchasing a building; it’s about planning for a secure financial future. It often provides greater income potential, professional tenants and good appreciation, making it a tangible opportunity for investors at all levels.
So, if you’re even thinking about dabbling in the booming commercial market, especially in the fast-expanding cities such as Ahmedabad, don’t do it alone. You want to work with experienced professionals, like those at RES Management, to help make better and wiser investment decisions.
