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How commercial real estate has changed the ways of investors

 The focus of experienced investors has shifted towards commercial real estate, with total return growth coming in at 45-50% versus 20-25% in residential properties. But only a few of them are aware of business plans to invest in the trade, which gives more options for experienced tenants to choose from.

How commercial real estate has changed the ways of investors


The opinions of more experienced private investors have already been changed in pursuit of higher investment returns. Housing investment has failed as the most popular method and will no longer achieve the expected result. 


Today, professional investors focus on office or retail buildings to preserve and increase their capital. Let's examine the basic requirements for transforming investment strategies and increasing interest in the commercial real estate sector.


An important factor for a commercial real estate investor is the lack of high competition. First, over the past five years, there has been a constant lack of display quality. Secondly, awareness and experience about investing in commercial real estate is still low, which, in turn, allows experienced realtors to choose the most interesting thing that will be in demand among the tenants.


How to choose a liquid body

In order for the investment to pay off as quickly as possible, the prospects and reliability of the facility must be studied. For trade, of course, a stable pedestrian movement is important. It is also important to correctly assess the room itself. 


In general, the demand for commercial premises among future tenants consists of a combination of factors such as the purpose of the building, location, functional planning, facility environment, transportation accessibility, and traffic efficiency. These are the criteria that make up the rental rate and demand for buildings.


investment strategies

With the right investment strategy, the average annual return on commercial real estate is estimated at 10-12%, which is nearly double the return on investment in housing. Thus, they are commercial properties designed to focus the attention of experienced investors due to the fact that they bring in more income and have a shorter payback period. 

investment strategies


But among those who invest in residential real estate, a high competition arose for something desirable at an attractive price: the large volume of new supply and low rates on preferential mortgages increased the number of transactions with residential real estate. 


As a result, a new volume of supply enters the rental market every year, which negatively affects price dynamics. 


Thus, the average rental price of housing in the country today is 15% lower than in the previous year (according to the DomClick service of Sberbank). 


The trend is explained by the fact that today the volume of supply exceeds the demand. At the same time, according to experts, the peak of problems will appear in two or three years, when the entire volume of residential real estate purchased with preferential mortgages will be on the market.


It is important to note that the commercial rental market has traditionally been considered more transparent and regulated in contrast to residential rental. Moreover, repair work is carried out by the tenant for himself and at his own expense, he interacts with the management company and pays them for utilities and maintenance, that is, the owner does not participate in these operations. 

At the same time, income is generated not only from rental, but also from long-term price increases. 


The object under construction will be the most interesting for the investor: the growth in the price of high-quality commercial objects during the construction cycle of the object can reach 45-50%. At the same time, it is important to evaluate the reliability of the developer and the experience of implementing previous projects in order to avoid the risks of delaying the implementation of the facility.


Among the reasons for the significant decrease in the profitability of residential real estate, it is also worth noting the move by developers to financing projects and selling apartments using escrow accounts. The cost of residential real estate from the beginning of the sale to the start-up of an object shows an average increase of 20-25%.

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