Retail is turning positive and hospitality is beginning to recover from the pandemic. The Industrial and Multi-Family sectors continue to see growth. All rents are beginning to rise across every sector, and commercial real estate is overall, holding up.
TIPS ON INVESTMENT OPPORTUNITIES IN MULTI-FAMILY
The nationwide housing shortage and home price increases, occurring in conjunction with inflation, has led to an increases in rent prices, which is only projected to continue to rise for the next two years. Apartment rents rose 15 to 20 percent last year and continue to rise by over 10 percent in many areas. This can be viewed as beneficial to investors looking for development opportunities of C and D multifamily properties, especially given the scarcity of available multi-family zoned land in many areas (where it almost always only makes sense to build Class A). Class C and D have not been built widely in the DFW area in nearly 30 years, but there is still a great need for these types of developments – and makes it a profitable investment for those looking to capitalize off high demand for apartments and predictable rent increases expected in coming years – regardless of paying a likely 5 percent cap rate.
INDUSTRIAL MARKET IN DFW
In addition, Lawrence Yun, of the National Association of Realtors, explained that the industrial market is getting a second wind from “just-in-case” inventory buildup as wholesale inventories boom, and industrial rents are likely to keep rising in the next two years as vacancy remains below 5 percent in many regions.
Matt Vance, senior director with brokerage CBRE, said that the cautionary factors with commercial real estate include global economic uncertainty, persistent inflation, and rising interest rates which overall, increased the cost of capital and overall capital market volatility.
Overall, if you know where to look and how to invest wisely, commercial real estate is still a great investment…but you must be ready to jump on an opportunity when it comes across your plate because they won’t last long with the state of our current market.