2020 commercial real estate investment trends
Before the COVID-19 outbreak and resulting economic downturn, the Denver commercial real estate market was thriving. Thanks to the longest economic expansion in U.S. history, Denver saw especially strong job growth and increasing demand for commercial real estate. And as of March 2020, nearly 7 million square feet of new space was under construction in Denver, which is the most in two decades, according to the CoStar.
However, as government-mandated stay-at-home orders and office closures have continued, the commercial real estate market is quickly changing. As uncertainty and inevitable change loom on the horizon, you may be wondering what this means for commercial real estate investment opportunities in Denver. Here’s what we know so far.
- COVID-19 has accelerated e-commerce growth by 4-6 years, which will result in a higher demand for distribution warehouse space to prevent future supply disruptions.
- Remote work has become more commonplace (at least through Summer 2020) which could impact how much space companies will occupy post-COVID-19.
- Despite the COVID-19 outbreak, the Denver commercial real estate market has remained relatively steady and there are still record levels of industrial warehouse development in the pipeline.
- Significant drops in oil prices are severely impacting energy firms that lease office space in Denver’s Central Business District.
- CoStar, one of the nation’s leading commercial real estate information companies, anticipates between 11% - 14% of CMBS loans to default due to the COVID-19 outbreak.
- According to CoStar’s forecast, properties that default on their loans could have a reduced sales price of ~66% on average, creating “value-add” commercial real estate investment opportunities.
While these factors undeniably create new or different investment risks, they also open up once-in-a-generation investment opportunities for those looking to get more invested in commercial real estate.
What qualifies as commercial real estate?
Commercial real estate refers to property that is leased out for business and/or retail purposes. Investing in commercial real estate simply involves the purchasing or development of properties that are occupied by commercial tenants.
Typically, commercial properties are categorized into five different types including office, retail, industrial, multi-family, and special purpose such as medical office building (MOB).
The benefits of investing in commercial real estate
Investing in commercial real estate has many benefits. Some invest for future wealth and financial security. Others may want to diversify their portfolios or utilize their investments for tax benefits. Other top benefits include:
- A higher-income with an average of 6%-12% return on investment
- A consistent stream of cash flow for the duration of the lease term plus renewal lease terms
- A less saturated market than residential real estate
- Longer leases with credit-worthy tenants compared to residential leases
Discover commercial real estate investment opportunities in Denver
If you’re interested in exploring commercial real estate investment opportunities in Denver or elsewhere in Colorado, reach out to us at Fountainhead Commercial. Whether you’re a first-time CRE investor or someone who is interested in modifying your existing investment portfolio, we’re here to help.With more than 20 years of experience, we’re your trusted source for commercial real estate advice and representation. Contact us today to learn more about CRE investment opportunities.