One of the best industries to get involved in in California is commercial real estate. Yet, in 2018, CNBC wrote that there were bad signs ahead for the industry. The main indicator is a slowdown in building and architecture due to a decrease in demand for commercial real estate. However, one of the sectors that are still booming is rental real estate, making multifamily units a great business to invest in.
Business Insider notes that in response to the slowdown, banks ramped up commercial real estate loan extensions. In fact, they reached a record of high of $4.3 trillion in 2018. The price of commercial property has also reduced.
One sector that has suffered tremendously is hotels or lodging. Airbnb dealt the industry a blow that it has yet to recover from since 2015. Some experts have speculated that this may have something to do with the rising demand for rent. Many hosts list rooms and apartments that they rent rather than own, while continuing to turn a profit.
On the other hand, industrial real estate climbed by 11% compared to prior years. This sector includes buildings that form parts of the logistics model used by big companies like Amazon or Walmart. Because of the continued growth in retail, warehouse and fulfilment centers are still in high demand and continue to be bought and sold on the market.
Though commercial real estate is facing a downturn, it may create opportunities for investors who can afford to buy and hold. As demand slows, prices may fall, making investments more attractive. Investors can then either look for renters or hold the property for resale at a higher price once it again climbs upward.
This article provides information on fluctuations in commercial real estate. It should not be misconstrued as or used in place of legal advice.