Opportunity Knocks

While recent months have seen positive reports for residential real estate, new research shows that commercial real estate has not hit bottom yet. With the worst decline in commercial real estate since the Great Depression plaguing the industry there are some positives.

While commercial real estate markets are expected to continue their decline into the middle of 2010, it appears that a turn around can be expected in the early part of 2011. The great news for investors is that this means that opportunities will begin to expose themselves in the middle of 2010.


For investors looking to make a shift from residential to commercial, this may be the window of opportunity many have been searching. Just as a huge opportunity in residential investment property has been available in the past 12 to 24 months, the next 12 to 18 months may expose potentially profitable ventures in the area of commercial property.

Warnings


The next couple of years will continue to be a bumpy ride for commercial real estate so people looking to make the transition must be prepared. While there will be some great prices on property, investors need to be prepared for occupancy rates in the 70-75% range.


Vacancies in Multi-Family may be the highest. With the huge number of properties in foreclosure and with fewer people qualifying to purchase, many are opting to rent … and they are renting houses rather than apartments. Apartment communities in urban markets will fair better than those in suburban markets.


Right now office is being hit the hardest. The ‘C’ classification of office space shows the most promise. As the economy recovers and new businesses are begun entrepreneurs traditionally seek out lower cost office spaces and C-class space tends to recover first.


The bottom line is this; investors will have a great opportunity over the next 12 months. The second wave is hitting now. Well positioned and well capitalized investors and investment teams can take advantage of the market and make huge profits over the next 5-10 years.


Be well capitalized, be prepared to have above average vacancy rates and you could be in the game for the long haul an be in a very good position in the future.