It has been observed that amidst the unstable nature of the market at the times of recession, the commercial real estate market remained strong and such trend has been advantageous to the industry at present. According to NuWire Investor the collective analysis from The National Association of Realtors NAR's Expectations and Market Realities in Real Estate 2015 report shows a positive point of view.
The NAR's report shows that interest rates are low and pricing is increasing together with volume. It also shows concrete earnings from 2014 as commercial property marked $288.5 billion in transaction volume by the third quarter of 2014 across all boards. The report then shows that investment commercial property was a sound venture.
One of the reasons commercial property is a good investment is that its value is based on usable square footage. This is not true with residential property. According to NuWire Investor, another reason is that cash flow from commercial property is greater. An example cited was an apartment block that if you lose one tenant, it is not as catastrophic as losing an entire household.
Another reason is that since commercial properties have longer lease terms they can be more sustainable as long-term investments.
In another study, it has been predicted that the commercial property sector is poised for strong growth over the next 12 months. According to NuWire Investor, Deloitte's 2015 Commercial Real Estate Outlook shows that the availability of financing through conventional and non-conventional sources will make such argument plausible. Strong capital has been easily made available because banks have eased their standards because investors now have more options due to the prevalence of alternative funding.
So with the way commercial properties are valued, greater cash flow, longer lease terms and easier means to get funding, investment in commercial real estate is proving to be a good investment.
