Why Investors Still Need to Focus on Commercial Real Estate in 2021
If you are considering investing in real estate in 2021, commercial real estate is still a viable option. The commercial real estate market is certainly different than it was last year, but prudent investors can still find good deals with CRE and can help establish or expand their existing portfolios with the help of an experienced Northern Virginia commercial real estate broker.
Despite the global pandemic and economic uncertainty in the fallout of COVID-19, the real estate market is surprisingly optimistic. This is due to several factors. One is that the market was in a strong position before the pandemic. Capital was readily available and loan origination levels were high, so there is still plenty of available capital that is looking to be directed toward new investments.
Additionally, even in the face of uncertainty, investors are slowly trickling back into the market as they become more comfortable investing in the current environment.
While some investors are still actively making deals, others are withholding their investment in the short-term, waiting for the results of the 2020 election and some balancing after the pandemic. However, competition is expected to ramp back up in 2021 as lockdowns and travel restrictions ease. Therefore, investors may be able to lock in better deals now before the expected influx of investment.
Low Interest Rates
The federal government attempted to stabilize the economy in the wake of the pandemic by cutting interest rates to historic lows. This bodes well for investors who may be able to lock in long-term investments that coincide with a lower price to borrow.
There are generally lower inventory levels across the area, in comparison to the years leading up to the pandemic. While this generally creates more of a buyer’s market, the low inventory also coincides with an economic downturn and a high employment rate. A motivated seller may unload hard assets for more liquid ones and a buyer who is able to lock in the property may be able to sell it in the short-term for an impressive profit or keep it as an investment property while charging higher rent amounts due to the decreased inventory levels.
The pandemic has reshaped the physical landscape of CRE, as well as many other industries. However, it has also presented unique opportunities to investors in new segments. The need for increased space may motivate businesses to invest in larger properties. The need for flexible coworking spaces is also greater than ever before with so many people still staying away from their typical office posts. Technology companies are in need of additional support to help them meet the demands of their customers.
Investors who are able to be innovative and meet the novel needs of commercial or residential tenants may be able to gain a competitive edge over other investors. As we all adapt to a “new normal,” those who can anticipate the changing needs of commercial or residential tenants will be better positioned in 2021.