It seems the U.S. economy is finally back on stable footing, and economic growth can be found in many areas. This year, the U.S. economy is expected to deliver its strongest gains since the latest financial crisis began. The labor market is healthy, and corporate capital expenditures are accelerating.
The positive change to the economic landscape proves particularly beneficial to investors.
One of the hottest areas to for serious investors in the commercial real estate market. Here are 3 Amazing Reasons that answer the question: Why invest in commercial real estate?
Decreased Vacancy Signals Increased Demand
Commercial real estate encompasses any land, property or buildings designated for business use. The three main types of commercial real estate include office, industrial and retail spaces.Vacancies in each of these commercial real estate areas are expected to decrease by the end of 2015. Office vacancy rates are projected to fall from 15.7% to 15.6% in the fourth quarter. Industrial vacancy rates will reportedly drop from 8.8% to 8.4% in the quarter. And the retail real estate vacancy rates are expected to fall from 9.7% to 9.5%. The decrease in vacancy rates demonstrates that more people are buying commercial real estate property. Demand is increasing, and investors will easily find clients interested in their properties.
2. Attractive Mortgage Loans and Low Interest Rates
Commercial real estate investing is about to become a much more attractive and lucrative. One of the reasons behind this shift in fortune is due to commercial real estate financing. Commercial mortgage-backed securities (CMBS) are a popular type of commercial real estate loan supported by commercial mortgages. It is predicted that a total $1.4 trillion in commercial mortgages will mature between 2014 and 2017. CMBS account for nearly a quarter of that total.
With so many mortgages going to be paid in full in the coming years, banks and commercial real estate mortgage brokers must find ways to entice people to take out more loans. Lowering interest rates is one way. When asking the question, why invest in commercial real estate, low interest rates on loans is a significant reason. Current rates range from 3.5% for a 5-year loan to 4.5% on a 20-year loan. Now is the perfect time for investors to take advantage of low rates and develop their projects before commercial real estate demand surges.
Projected Growth Promises Big Returns
The National Association of Realtors (NAR) has predicted that the commercial real estate outlook will continue to stabilize and trend positively throughout 2015. This growth is projected despite a slowing global economy, which suggests impressive confidence in the commercial real estate market. As consumer demand increases and more commercial real estate loans mature over the next few years, commercial real estate is poised to take off.
Why invest in commercial real estate, you ask? Because now is the time to take advantage of a positive economic landscape and invest your money in a market ripe with potential growth.