Should you invest in commercial real estate in 2023? 2022 was a banner year for commercial real estate, defying the gloom and doom predictions, but how will 2023 play out for investors? In a recessionary environment, is it a good idea to invest in commercial real estate?
Commercial Real Estate Investing in 2023
The winners in commercial real estate are beating inflation by using capital to invest in cash-flowing assets and they are countering high interest rates with creative financing and value-add strategies. For investors on the winning side, life goes on as they continue to build wealth in today’s commercial real estate market.
Sadly, the losers are waiting on the sidelines afraid. They are waiting for interest rates to fall and inflation to be checked. They’re also getting all their information from media, who are feeding their fear. The losing side is letting the media dictate what they do with their life and as a result, life is on hold.
So, if you want to be on the winning side, don’t wait! Start building your financial future by investing in commercial real estate right now. Don’t wait because life won’t wait for you.
2022 – A Banner Year
For me and my protégé students, 2022 was a banner year! Here are just three examples of investors in our Protégé Program at Commercial Property Advisors that were winners in 2022:
Building a Self-Storage Business: Dean was a burnt-out corporate guy who took a leap of faith and transitioned full time into commercial real estate. Over the last couple years, Dean has acquired 3 self storage properties. Discover how he did it and the valuable lessons he learned along the way: Building a Self-Storage Business in Today’s Market.
Value-Add RV Storage: Sam realized that only commercial real estate could produce the cash flow needed to accomplish his retirement goals. Sam purchased an ugly property and using value-add strategies he will create a beautiful retirement for himself and his family. To learn more about the RV storage Sam acquired and what a life changing deal it is, check out his video here: Beautiful Potential in Ugly Commercial Properties.
Multi-Million Dollar Apartment Deal: Jacob was a waiter just out of college when he purchased his first commercial property. His inspiring true story proves that all it takes is one commercial real estate deal to completely change your life! You can find out more about how he purchased a 90-unit apartment with no money down here: Waiter Buys 90-Unit Apartment No Money Down.
What do all three of these investors have in common? They didn’t wait to begin securing their financial future.
Predictions of Market Collapse?
There were a lot of predictions of doom and gloom for commercial real estate in 2022, but despite seven interest rate hikes over the last twelve months, the commercial real estate market remained stable. Why didn’t the market collapse?
- The demand for commercial real estate is still high. Everyone needs a place to live, to store their things, and a place to conduct business.
- Consumers are adjusting to the higher interest rates as a fact of life now.
- The commercial real estate market is the best option for investors. The fact is commercial real estate is the best investment vehicle to build wealth right now.
- High interest rates will not stop us from investing. Remember, we are on the winning side; interest rates don’t stop us, we just adjust.
2023 Predictions
The doomsday predictions didn’t happen in 2022, but what does 2023 hold for commercial real estate investors? Here are my predictions for 2023:
Losers in 2023
Shopping Centers without a Grocery Store Anchor: If trends continue, shopping centers without a grocery store as an anchor will most likely struggle in 2023 and beyond. With all the online shopping and downturn in the economy, I wouldn’t recommend investing in shopping centers if you don’t have a grocery anchor.
Class A Office Space: Investors of Class A office space will be losers this year. The downtown of my city in California has a 28% vacancy rate in class A office space. The downtown core is somewhat of a ghost town now compared to 2019, and in my city alone there are 1300 leases of class A and B office space set to expire. I would think twice before investing in office space.
Those Sitting on the Sidelines: Those people waiting for the “perfect time” to jump into the market are the losers in 2023. They’re waiting for the commercial real estate market to fall drastically, but that will not happen. So the people waiting on the sidelines are the losers because life will pass them by. They need to act now to be on the winning side.
Aggressive Syndicators: A lot of apartment syndicators are inexperience. They may be able to pull money together and buy apartment buildings but they’re too aggressive in two things: what they pay and with their rent projections. They are overpaying and then hoping to increase the rents enough to compensate. Syndication is a good strategy; they’re just doing it too aggressively. What they need is an experienced mentor. Without it, these overly aggressive syndicators will struggle.
Winners in 2023
Apartment Investors: I have the privilege of working with investors from coast to coast. This gives me market data from across the country and allows me to track the trends. In the last quarter of 2022, I had several protégé students that locked in interest rates on their apartment buildings at a lower rate than for a single-family home. This is highly unusual, and it indicates that the lender sees an apartment building as a lower risk than a single-family home, which gives the commercial investor preferred lending.
Storage Industry: This category includes self-storage, RV storage, and industrial warehouses. Based on my research and experience in the last year, I am confident about investing in storage assets this year. But don’t just take my word for it, Wall Street analysts are also recommending storage asset in a 2023 recessionary environment. They believe that RV storage, self storage, and industrial warehouses will be strong assets to invest in this year.
Mobile Home Parks: Mobile home parks are a great commercial investment; high demand and low supply, with high cash flow and low volatility.
