Everything you need to know about Commercial Real Estate
After the remarkable changes that happened in the world in the past two years, due to the pandemic and quarantine, the real estate market was drastically affected. However, with the significant decline in new COVID-19 cases, the commercial real estate market heading into 2022 holds a more positive outlook.
The commercial real estate market appears to be straightforward in 2022, the multiple change dynamics like demand and supply, affordability, capital flows, interest rates, inflation, climate change, and a never-ending pandemic all compel us to dig deeper in both transaction diligence and portfolio performance monitoring to properly evaluate across a five-to-ten-year investment. While the real estate sector has achieved a remarkable rebound from the pandemic's economic impact, investors must pay closer attention to identifying long-term winners and losers.
Take a closer look at commercial real estate
Commercial real estate is concerned exclusively with property used for business-related purposes. This vast category of real estate can range from a single storefront to a large shopping center. Retailers of all kinds, office spaces, hotels and resorts, strip malls, restaurants, and healthcare facilities all fall under the umbrella of commercial real estate. As the name implies, commercial real estate is utilized in commerce, and multi-unit rental properties that serve as tenants' homes are considered a commercial activity for the landlord.
Moreover, some business owners own the building they occupy; however, the more common and popular option is leasing the building instead of owning it!
Commercial Lease
The building property is usually owned by an investor or a group of investors, who receive rent from each business that works there. Commercial lease rates or the cost of renting a space for a set length of time, are usually expressed in annual rent or a monthly retainer. Commercial leases typically range from one to ten years or even longer, with office and retail space typically requiring five to ten-year commitments. In comparison, yearly or month-to-month, residential leases are more short-term.
Furthermore, there are four types of commercial leases, each one demands a different level of accountability from both the landlord and the tenant:
· A single net lease: the tenant is responsible for paying property taxes.
· A double net lease: the tenant is responsible for paying property taxes and insurance.
· A triple net lease: the tenant is responsible for paying property taxes, insurance, and maintenance.
· A gross lease: the tenant is responsible for paying only rent while the landlord is responsible for paying for the building's property taxes, insurance, and maintenance.
Investing in Commercial Real Estate!
Investing in commercial real estate can be profitable and can act as a hedge against stock market volatility. When investors sell their properties, they can profit from appreciation, but the majority of their profits come from tenant rents. And you can invest either directly or indirectly.
Direct investment:
Invest or scan make direct investments in which they own the physical property and hence, become landlords. People who either have a lot of information about the market or can hire firms that do, are the ideal candidates for direct investment in commercial real estate. Commercial real estate is a high-risk, high-reward proposition; therefore, investing requires a significant amount of capital, such an investor is likely to be a high-net-worth individual.
Additionally, the ideal property is located in a location with a low supply of commercial real estate and high demand for it, resulting in favorable rental rates. The value of a commercial real estate purchase is also influenced by the strength of the local economy.
Indirect investment:
Alternatively, investors can indirectly invest in the commercial market by purchasing market securities such as real estate investment trusts or exchange-traded funds that invest in commercial property-related stocks. Furthermore, they can also purchase commercial real estate-related companies such as banks and realtors.
Tayf: The investment management company in Egypt!
Tayf is an investment management company aiming to add value to the Egyptian market by creating and implementing an unforgettable experience through the introduction of new ideas. Tayf is located in New Cairo and they offer many services: commercial real estate, franchise investment, and concept development. In commercial real estate, Tayf handles the entire real estate process, from research to marketing and operations; in addition, they handle commercial properties. Tayf manages, maintains, and controls all aspects of your commercial assets. For instance, if you are looking for offices for rent in the 5th settlement, Tayf is the place to go to!
Now that you know all about Commercial Real Estate, let’s delve deep and learn more about the future of commercial real estate! In this article, we dig deeper into what is ahead for commercial real estate locally and internationally.
Check out this article to learn more: What is ahead for commercial real estate in 2022?
