Virginia investors who are seeking a solid, secure investment opportunity are often ambivalent about commercial real estate and reluctant to take the plunge. Although the potential upside of investing in CRE is promising for a variety of reasons, those who jump in but fail to fully understand the nature of the market and the realities of investing in it may soon wish they placed their investment dollars elsewhere. However, the opportunity for a combination of consistent returns, growth and tax advantages within a passive investment environment make CRE a good choice for the right investor.
From the beginning, it’s important to be acutely aware of the different sectors that comprise the more generic term of “commercial real estate.” Knowledgeable CRE investors understand that the primary sectors of industrial, retail, office, multi-family and special sector all operate under differing supply and demand constraints. For instance, it should come as no surprise that the retail sector has been subject to significant volatility in recent times. Additionally, there are multiple factors in the local economy and real estate market that impact an investment, as well as the overall national economy.
As an example, if a certain segment is under-supplied in the local market, there may be an opportunity in fulfilling that need. As always, with any investment, due diligence on the part of the investor is essential. Circumstances are in a constant state of flux, markets go through cycles, even in the best of times, and CRE investors should be prepared both financially and psychologically for the unexpected twists and turns that are all but inevitable for long-term investors. Knowing what, when and how to invest in CRE is critical to success for the investor.
The tendency to hold CRE for longer periods plus its general illiquidity makes it more imperative for the investor to be certain before pulling the trigger on an investment. An experienced real estate lawyer can be helpful prior to investing and also offer counsel on the ongoing legal issues involved in CRE.