The rising realization of a lower-for-longer global interest rate horizon, along with meager bond and equities returns, has contributed to a long-term move to real assets. As investors consider the impact of political and economic uncertainties on capital markets, it seems like a good moment to reconsider the role of real estate in a multi-asset portfolio and how to maximize performance in a more globalized economy.
Higher allocations to life and pension funds, the evolution of sovereign wealth funds, legal reform, and socio-demographic dynamics all point to an increase in real estate capital allocations. Investing in real estate is one of the oldest and least volatile strategies to safeguard and develop your wealth. While investing in residential real estate may appear to be the most apparent and accessible option, investing in commercial real estate may offer up a world of new opportunities. Here are four compelling reasons to add commercial property to your portfolio.
Portfolio diversity is just as important as the investment itself. One can diversify your portfolio on their own or with the assistance of portfolio managers if necessary. You can seek assistance from our specialist asset and property experts as Assetmonk encourages clients to diversify their investments. Assetmonk provides residential real estate as well as commercial real estate modules such as co-living and senior housing, both of which are extremely valued and selected projects. Investing in them would be a wise option and would make you a wise investment.
1. The possibility of higher returns
There’s a reason why some of the world’s largest organizations invest extensively in commercial real estate: the potential returns are substantial. Commercial properties are major business since they are significantly more expensive to rent or buy than single-family residential properties, which means they often give investors better revenue possibilities. The hazards vary and might be bigger based on your company model.
Returns can be earned in two ways: distributions of cash flows from operations and/or payouts from a capital event related to the property (like a final sale or refinance). The business models of certain projects aim for more regular and/or dispersed cash flows, whilst others are more likely to earn the majority of dividends towards the conclusion of the hold period (capital appreciation).
Since launching in 2014, the CrowdStreet Marketplace has closed 470+ commercial real estate offerings. To date, 45 of those offerings have been fully realized – with an IRR of 18.2%
2. An investing platform with a high ‘deal flow’ and more control
It might be difficult to develop a commercial real estate portfolio since there are so many options. Where should you concentrate your efforts, and what kind of property should you seek?
Investing through a commercial real estate platform provides you with continuous access to fresh investment possibilities (“deal flow”). Furthermore, you acquire control and options, such as:
More active engagement in investment selection than merely purchasing a REIT. Rather than a pre-packaged portfolio, there is a greater variety of single or multiple project possibilities.
Access to a wide range of geographical areas and commercial real estate markets.
3. Add alternative assets to your portfolio to diversify it.
Historically, commercial real estate investing has been a haven for the ultra-rich and well-connected. Online platforms like CrowdStreet are breaking down such barriers and providing more investors (in CrowdStreet’s case, accredited investors headquartered in the United States) with access to opportunities throughout the country.
Because the value of commercial real estate holdings is not directly related to the daily changes in the public stock market, investing in real estate is one option for investors to diversify away from stocks and bonds and develop a more robust portfolio.
4. A free special study on 2021’s top commercial markets.
The newest CrowdStreet analysis provides professional insight into the top 20 markets for commercial real estate investment in 2021. Kiplinger readers receive free access to this unique information for a limited period.
You’ll learn which cities throughout the country are set to launch a new boom cycle and why. The report also discusses the top markets for:
- Acquisition and development of multifamily properties
- Property development for rent
- Commercial properties
- Offices
- Hospitality
- Retail
- The life sciences
- Prefabricated housing
5. Value-add
Real estate may provide revenue while also creating value through asset management. To source appealing value-add possibilities, real estate managers must have strong market contacts and collaborations with developers, brokers, local governments, and private and institutional actors. A thorough understanding of the planning system, together with business strategies that extend, renovate, and modify the asset’s use, or improve the property’s sustainability credentials, may all help to unlock and boost value. The capacity to reposition an asset and generate income growth are critical components in producing alpha.