As the country slowly enters the period of postpandemic recovery, many real estate investors are exploring their options. Of course, it’s impossible to know for sure what the future will bring, but based on what has happened in the past year and the typical market behaviors after a period of struggle, it’s possible to predict some likely trends. Here are five we expect to see.
1. Hotel and Retail Properties
It’s no secret that the hospitality and retail industries were hit hard by the pandemic, leaving many property owners with vacancies and delinquent rents. For those looking to sell, time is of the essence, which means you might have some negotiating power as a buyer. If you can offer a fast cash transaction, you could have an edge over the competition and possibly some room to negotiate a lower price, especially if the seller is eager to offload the property. Before you buy, understand the conditions of the local neighborhood, including any zoning restrictions that might impact how you can use the property in the future.
2. Office Spaces
The transition to many employees working from home brought to light the fact that many people are just as productive—if not more so—outside of an office environment. In addition to some businesses closing their doors, many others are downsizing their offices to accommodate only the people who want and need to be in the space. The result is a glut of available office spaces—to the tune of 42 million square feet—on the market.
This may just be the beginning, so keep an eye on this sector as supply might increase and prices may continue to drop. Know that investing in office space is more of a long game since rents are actually expected to decrease in the near future as demand decreases with increased supply. Alternatively, you could invest in an office building with the intent of repurposing the space into a different type of commercial use. Depending on the local zoning regulations, residential use could also be a possibility.
3. Undeveloped Land
The pandemic has naturally changed some habits, and some of these are expected to linger. For example, more people are enjoying the outdoors and taking vacations closer to home to minimize travel. Although these habits may have developed in an effort to avoid exposure to others, many people are realizing that they are also less expensive activities. Entrepreneurs are capitalizing on this by creating new opportunities for leisure and safe gathering, including building or improving campgrounds, outdoor retreat centers, and so on. To do this, they need land.
Investing in undeveloped land and making the necessary improvements (e.g., access to utilities, grading, and so forth) to make it buildable could reap large returns in the right markets. This is also true in areas that are experiencing a housing shortage, so keep multifamily building in mind when evaluating undeveloped land for investment.
4. Industrial Sites
The industrial sector has been steadily growing throughout the pandemic, including space for data centers and warehouses for e-commerce companies. If you can identify distressed properties and make the necessary improvements to make them desirable for industrial tenants, you could make a profit on the property or generate long-term rental income. The pandemic has taught us that technology is no longer a luxury—it’s a utility. It seems likely that no matter what happens in the future, there will always be a need for industrial spaces that support our technological infrastructure.
5. Smaller Markets
Some of the largest metro areas in the country are seeing a population decline as people flee the cities to less densely populated areas. This could spark a rise in the demand for commercial spaces in smaller markets, so start hunting now for suitable properties. Think about the various services a growing population will need in smaller cities and suburbs—groceries, gyms, restaurants, and so on—and invest there. In addition to properties that have been long abandoned, you might also find spaces that were only recently vacated because of the pandemic. These properties are likely to be in better condition and require less improvement before leasing to a new tenant.
How Socotra Capital Helps
When you need fast cash to jump on a hot opportunity, we’re here for you. It’s not always easy to get a commercial real estate loan from a traditional bank. Although interest rates are low, banks still have tight restrictions on commercial lending, so even if you have the cash for a down payment, you might not get approved. If you have equity, we can provide the capital you need to purchase and improve commercial real estate to rent or resell. Hard money loans through Socotra Capital are based not on your financial history or credit report, but on the potential of the property. Pitch us your ideas to see if we’re a good fit. If you’re new to private lending, read The Borrower’s Guide: Process, Preparedness, and Timeline to learn more.