As I mentioned in another recent blog, the commercial real estate market stands as an exciting opportunity for investors looking to broaden their skills, diversify their portfolios, and cut their teeth in new investing scenarios. All that said, the market can be a challenging one to traverse — especially if you are new to its specific demands and characteristics.
Here are a few top challenges in commercial real estate, at a glance, to help you stay on track in your new commercial endeavors.
Bigger capital requirements
New commercial investors will likely be quick to notice the market’s unique capital requirements, which are comparatively higher on average. In fact, “most commercial real estate investments require a down payment of 25 percent at minimum,” whereas other investments typically require closer to 35-40 percent. This notion can make it difficult to immediately diversify your fledgling commercial portfolio, which if underestimated or overlooked, can ultimately hinder your ability to participate in the market to begin with. Therefore, it is key to verse yourself in these requirements and similar market-exclusive demands prior to executing your first project.
Proper management and maintenance approaches
Commercial properties can require a fair amount of skill and energy to properly maintain, and obvious as this may sound, it is a factor that is occasionally overlooked by new commercial investors. Either way, it stands as a notable challenge for investors of any experience level. You must enter the commercial market with a strong inherent level of commitment to your new projects. Otherwise, you may quickly find yourself in adverse situations with potential buyers and tenants.
Commercial real estate, like real estate in general, is no stranger to changes and emerging trends; it is essentially predicated on such shifts, and investors must stay on top of such movements to keep pace with competitors and remain professionally afloat. That said, a big challenge for the commercial front is the overall embracing and application of emerging trends. There is no question that exciting developments are being observed in various commercial subdivisions — such as retail properties, hotels, and office spaces — but the challenge lies in how to best apply such trends to benefit the market at large. The key, in this regard, it to maintain a healthy blend of market insight and open-mindedness; know the market as it currently stands, but never be reluctant to accept and dissect new market paradigms and practices as they emerge.