The Spokane and greater northwest region is undergoing rapid growth, as businesses experiencing search more favorable business climates. As companies break ground throughout the region, savvy investors are turning their attention to new income opportunities in the commercial real estate marketplace.
With a number of options to generate income and preserve wealth the time to invest in commercial real estate has never been better. Spokane and the surrounding area offers a wealth of opportunity for new investors, from multifamily developments and retail sites, to business parks and downtown high rises.
If you’re looking to diversify your portfolio to include commercial property, there are a few key elements to prepare for as you dip your toes in this booming marketplace.
Commercial real estate is a popular asset class because of the passive income it can generate, and considerable growth potential. To be successful at this type of investment you need to ground your decisions in data and conduct thorough research on your target markets.
By following these key steps, you’ll gain a better understanding of what to expect out of your commercial property investment, and how you can increase your chances of success.
1. Recognize that not all property types offer the same opportunities.
There are a number of asset types within the commercial real estate space, and the overall profitability of each sector can vary greatly. In general, commercial real estate is broken down into 5 sectors:
Multifamily is especially popular due to the high demand of housing in Spokane and surrounding cities, but mere demand does not necessarily mean highest returns. Before you set your sights on any of these sectors, our brokers will research the current performance of each asset class to determine their viability in your target market areas.
2. Understand your target market areas.
Location and the asset sector can play a large role in potential profitability, and understanding your target markets is critical in assessing your options. Spokane, Coeur d’Alene, Seattle, Kalispell and other Northwest cities all offer unique advantages, and it will be important that you rely on an experienced CRE broker to help you analyze each market area and asset class.
Market saturation is a key consideration in the commercial property arena. It’s important to carefully research your target cities and markets to assess risk. You may consider looking for areas within your market that are undersupplied but local data shows potential for growth.
This is where a CRE broker becomes a valuable resource. Brokers have access to a number of intelligence tools that can compile data on any market area and asset class.
3. Pause before jumping on the current trends.
Using multifamily investments as an example; the need for housing has far outpaced available space, that doesn’t automatically mean that multifamily assets will perform well for years to come. As with any investment you need to look ahead for the “long game.” Current trends can set unrealistic expectations that may be unsustainable.
As you assess market data, look for cycles. These can be indicators for where opportunities and risks lie, and help you make a more informed decision about the type of asset you want to invest in.
4. Have reserve funds and cost contingencies planned out.
As with any investment, there are risks and uncertainties that could strike at any time. Even those who perform the highest degree of due diligence can be negatively affected by a down market. You can add a layer of protection by accounting for possible cost contingencies.
These contingencies are funds that you set aside during your initial acquisition to help cover unexpected expenses. Think of it as a rainy day fund for your commercial investment. The average cost contingency is 5%-15% but varies depending on the type of property you invest in, and a number of other factors your CRE advisor can explain.
5. Trust the expertise of a G&B commercial real estate broker
Our commercial real estate brokers are more than just experts in navigating sales--they’re local, trusted advisors who work with investor clients to locate commercial properties that are posed to provide the highest financial returns. For over 80 years, investors around the world have trusted G&B to drive exceptional value, and we continue to meet the highest standards of excellence.
We never take a one-size-fits-all approach to commercial investments. Your lifestyle, goals and existing assets play a large part in your future investment decisions. We work closely with our clients to understand their goals and develop a strategic investment strategy that’s backed by deep data.