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Is Now a Good Time to Invest in Commercial Property?

In the world of alternative investments, few sectors have garnered as much respect for their stability and long-term appreciation potential as commercial real estate.

Is Now a Good Time to Invest in Commercial Property?

In the world of alternative investments, few sectors have garnered as much respect for their stability and long-term appreciation potential as commercial real estate. Across generations, this asset class has stood steadfast in financial security, drawing investors seeking to build wealth and expand their portfolio. However, as with any market, commercial real estate is not impervious to fluctuations, and when uncertainties arise, fear begins to take root.

With the ebb and flow of economic cycles, fear and speculation can cast a shadow of doubt on investors, leading them to question the value of owning commercial property. The good news is – whether you’re bearish and think we’re heading towards a recession, or bullish and believe there’s opportunities in today’s market, now is a great time to invest in commercial real estate. Let’s explore why.

A Common Misconception

Why invest in real estate if you can get a 4-5% return rate in a treasury bill or money market account?

Simply put, with the current rate of inflation fluctuating between 3-4%, you’re not gaining as much purchasing power as you would by investing in real assets. And sooner or later, you likely won’t be able to keep up with inflation. Commercial real estate has the potential to deliver substantially higher returns, making it a more attractive option for investors seeking to beat inflation and achieve greater wealth accumulation in the long run.

Position Your Portfolio for Success

Historically, real assets, like real estate and commodities, have demonstrated resilience during volatile periods. Real estate tends to appreciate in value, strengthen purchasing power, and providing a buffer against inflationary pressures. Commodities, especially precious metals like gold and silver, are also sought after as stores of value during times of rising prices.

In the near term, it’s important to understand that investor returns can be multifaceted and vary depending on the asset mix and broader economic conditions. Portfolio diversification can play a crucial role in managing risks and optimizing returns over the next cycle.

The low volatility of real assets can serve to counteract other, highly volatile assets in your portfolio. The counter-cyclical nature of commercial real estate, coupled with low correlation to other asset classes, can act as a defensive position during times of economic pullback.

Timing the Market

A mantra that has been drilled into investors for years is that you can’t time the market. In reality, if you break down bigger cycles of different asset classes, there are better times and there are worse times to buy. And it often relates to selecting the right product type in the right cycle.

Timing does matter. Especially in a period of transition, like we’re currently in, it’s more important now than ever to understand what’s going on and how to position yourself accordingly.

Given current supply and demand fundamentals, we believe it is an opportune time to invest in flex/industrial commercial real estate properties. There is an ever growing demand for space due to the growth of the service economy and the reshoring of certain industries, and there is a finite level of supply due to the high level of construction costs.

There are, of course, many other factors to consider when sourcing a new commercial real estate opportunity, but the general themes above are an important part of our investment approach and guide our current decisions. If you’re able to find the right market and asset class, and willing to ride through the turbulence of intermediate cycles, there’s potential for massive, long-term wealth creation.

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Takeaway

While the market may present opportunities for potential growth and lucrative returns, it is essential to approach any investment with a well-thought-out strategy and a clear understanding of the current economic landscape. By looking at the big picture landscape, conducting thorough due diligence, and consulting with experienced professionals, investors can position themselves to capitalize on the advantages that commercial property can offer.

Now is an excellent time to get started with Excelsior. Whether you’re interested in learning more about our process, or ready to actively invest, we’re happy to answer any questions you may have. Get in touch with us today!

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Excelsior Capital

A real estate private equity firm that owns and operates high quality multi-tenant office assets in emerging secondary markets.

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Excelsior Capital

104 Woodmont Blvd, Suite 120
Nashville, TN 37205

investors@excelsiorgp.com

Disclaimer: Under no circumstances should any information presented on this website be construed as an offer to sell, or solicitation of an offer to purchase any securities or other investments. This website does not contain the information that an investor should consider or evaluate to make a potential investment. Other materials related to investments in entities managed by Excelsior Capital are not available to the general public.

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