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Philly Real Estate Investing: Retail, Commercial, Industrial or Residential?

Real estate is a dynamic industry with a lot to offer investors. With all of the changes going on in the economy, now is the time to start investing at a high level. Investing in real estate requires some capital to get started. However, once you get started, you can start to excel quickly in your finances. Here are some of the biggest asset classes within real estate to consider.

Retail Real Estate

At one time, the retail real estate market in Philadelphia was hot and it is still desirable in high traffic locations where big-shop national tenants are leasing out space in the center city business district. However, this has changed greatly over the years. According to experts, this is perhaps the worst asset class on a macro level in the entire economy to invest given that e-commerce companies such as Amazon have seriously killed the need for the traditional brick and mortar retail shops.  The outlook for retail companies is bleak, and many people think that we will continue to have issues here in the future. It is at the point now where retail needs to be tied in with a robust industrial site in order to compatible with online purchases – equipped with state-of-the-art technology and high ceilings and located near population centers. Growing demand for those types of facilities has supported development of new space to support retailers such as Amazon.

Real estate investing requires someone to think many years out. There are few people who think that the retail segment is going to drive growth in the years to come, especially with all of the online shopping that is taking place. My advice would be to only buy mixed-use properties where it is only 20% of the building’s square footage and keep it to food and drink service type of tenants – we have provided a graph below detailing how this is best retail growth sector, especially in urban corridors such as Philadelphia.   Avoid strip malls and other 100% retail sites unless there is a compelling conversion to another use such as residential or office.

Commercial Real Estate

Another area to consider is commercial real estate. This is an area in Philadelphia that is getting competitive in a lot of cases. For real estate investors, this is a great area to invest in. The great thing about commercial property is that you can make money in various ways and have mixed used components which hedge you exposure in a being fully vested in a particular asset class. Not only do you earn rent from the people who are using the space, but it also appreciates over time – especially in core or emerging locations.The real estate in Philadelphia is some of the oldest in the country because of the age of the city.

If you want to invest in commercial real estate, make sure to spend a lot of time on the inspection process. This is an area that has a lot of potential for the future to drive growth and profits for investors. According to experts, commercial real estate in the city is going to appreciate in the years to come. This is a great sign for people who want to drive innovation and growth in the future.

Industrial Real Estate

As I eluded to in my previous blog – industrial property values are on fire! According to research and analytics firm MSCI, Philadelphia industrial properties returned close to 13.8 percent, the highest of any property segment in 2016, and well above the national average. Also, according to the most recent industrial activity report by Yardi, Dynamics of the industrial sector are changing for many reasons, particularly the growth in e-commerce, foreign trade and technology. The old model for warehouses was to cluster them off the beaten path or near port cities, where products would be stored and shipped to retail locations.  This has SIGNIFICANTLY changed as consumers want to buy products online and have them delivered almost immediately. U.S.consumers purchased nearly $400 billion of goods online in 2016, and e-commerce sales have been growing by about 15 percent per year.  That has put industrial in the unusual position of competing for land with other asset classes.

Residential Real Estate

When many people think of real estate investing, they automatically think of residential real estate. This is one of the best areas for people to invest in for a variety of reasons. Now is the time to try and drive success and growth in this area in the future. With all of the changes that are taking place in the residential market, investors are having trouble keeping up with demand. In some parts of the city, home prices are appreciating faster than many other areas across the country. Some buyers are having issues finding properties.

In the coming years, many experts believe that this is a trend that will continue. A lot of people are worried that housing prices will actually get too high for people to afford. Now is a great time for investors to start investing in this area of the real estate business. The outlook for residential real estate is strong in the years to come, and interest rates are low enough that the cost of capital is still low. If you want ways to invest and drive profits for the future, this is the way to do so. Before getting started with your investing plan, make sure to do a lot of research on the local market in Philadelphia – my suggestion would be to look into Point Breeze, Fishtown, Lower Kensington and Brewerytown as there is still great potential in these sub-markets.

 Before getting started with your investing plan, make sure to do a lot of research on the local market in Philadelphia and speak to an investment professional like the ones here at Point Acquistions.

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