Commercial real estate can be a valuable part of a diversified portfolio. This is especially true in the current climate, as businesses reopen and economic recovery continues. In fact, CBRE projects a 40% increase in total U.S. transaction volume by the end of the year and other experts see new opportunities emerging.
Up until recently, vetting commercial real estate has been challenging, but new investment firms are making the process easier and more accessible. If you’re thinking about expanding your portfolio, a few considerations can help you determine the best way to invest in commercial properties. Below, we highlight what to keep in mind when making your decision.
Focus on Potential Returns
Although commercial real estate has had its share of ups and downs throughout the pandemic, its outlook appears strong and finding unique investment opportunities can help you achieve the performance you seek.
On average, commercial properties have an annual return between 9.4% and 10.5% depending on investment type. These returns have been fairly consistent over the past 25 years, making commercial real estate a solid opportunity. While it’s important to note that the potential for strong returns comes with the possibility of substantial losses, building a diversified portfolio can help to offset risk.
Commercial real estate investment is generally available to accredited investors. These are investors who have an annual income exceeding $200,000 ($300,000 for joint income) or a net worth of $1 million or more.
Understanding Potential Returns
Another benefit of investing in commercial properties is the potential of earning strong returns. This works best when combined with a well-balanced portfolio and it can help to offset losses associated with other asset classes.
On average, commercial properties have an annual return between 9.4% and 10.5% depending on investment type. These returns have been fairly consistent over the past 25 years, making commercial real estate a solid opportunity.
Consider a Range of Asset Classes
If you’re already invested in commercial properties, diversifying your portfolio mix could be a helpful way to hedge against volatility and access a broader range of assets. We recommend considering a combination of asset classes including industrial properties, offices, senior housing, and retail spaces.
As with all real estate investments, geography is also important, so ensuring that you have access to top markets can play a significant role when it comes to returns. Cities including Raleigh-Durham, Austin, and Dallas-Fort Worth rank among the top 10 markets for 2021, and each carries unique advantages.
Select the Right Investment Platform
Above all, it’s important to choose an investment firm that can provide you with quick and easy access to the types of commercial properties you seek.
With over 500 commercial real estate offerings, CrowdStreet is an online crowdfunding platform offering opportunities for accredited investors. Since launching in 2014, the firm has raised $1.9 billion in capital and it has returned $197 million in investor distributions.
In addition to their wide range of offerings—including diversified funds, individual deals, and tailored portfolios—Crowdstreet also provides a range of other benefits. Among these is the fact that investors are generally "hands-off" passive investors in deals on the CrowdStreet Marketplace and the fact that CrowdStreet conducts an objective review process on all of its deals. While investors are encouraged to conduct their due diligence on each offering, CrowdStreet aims to provide comprehensive data to help inform those decisions.
Combined, these offerings provide access to new opportunities along with the ease of investing online. You’ll be able to choose which types of properties work best for you while joining a community of like-minded investors. If you’re interested in a customized portfolio, CrowdStreet’s Private Managed Accounts service can create one designed to meet your specific goals.
As the economy continues its recovery, investors are consistently looking for new ways to expand their portfolios. This is especially true when it comes to turnkey investments. Commercial real estate offers a way to diversify existing assets while tapping into new markets. By selecting an investment platform that provides you with a range of options, you can select the properties that are right for you.