Investing in Commercial Property.
- Author Peter Mcardle
- Published November 17, 2007
- Word count 635
Investing in commercial property is a great way to invest your money. There are many alternatives to investing in commercial property which makes it good for every type of investor to get involved.
So what are the options available for those interested in commercial property?
Some of the options you may already know exist, lets look at some,
Listed property trust is the simplest way to invest in commercial property, all you have to do is open an account with a stockbroker, deposit some money and then place an order. Listed property trust can be found on the stock -market, they invest in a wide range of commercial property i.e main office buildings, shopping centres, as well as industrial and leisure properties.
The trust manager chooses properties and is responsible for the maintenance, renovation, and for collecting rentals.
Property securities are managed funds which invest in a list of property trusts. This option is very good for somebody who is unsure which trust is appropriate. Purchase is through a prospectus.
Another simple way to invest is public property syndicates , with application via a prospectus. The downfall is they require a large minimum outlay and you are locked into the investment for the duration of syndicate unless you can find someone to buy the investment from you.
If you have research the market and have some acquired knowledge then direct property investment could be for you. You can also buy direct property through a private property syndicate.
Mortgage funds are managed funds that lend money over property. The investor will be offered security and returns that are a little higher than a bank term deposit but there are no capital gains.
Commercial property is thought of as office, retail and industrial but as an investor you need to be aware of the many options available to you. Health care, child care and retirement properties are great examples, also parking lots , storage facilities.
An article read "Americans regard self storage as an absolute blue chip investment and is considered the safest real estate based investment in the United States"
So when is the right time to invest in commercial property?
If you are a participant in the share market you would be aware of the "investment clock", which its purpose is to show how the economic cycle works.
An overheating economy is followed by higher interest rates and falling share prices, when the economy declines so does interest rates and shares begin to raise again.
Here is a guide to the way commercial property could fit with the economy;
The economy starts to slow. Direct properties stop raising and may even decline. The authorities inject liquidity into the economy. The stock market and listed property trusts rise. The economy begins to rise. Direct property begins to rise Inflation may also rise and interest rates rise The stock market and listed property trusts fall.
American research has identified four phases based on economic and supply and demand.
Phase One is when the market is generally in a condition of oversupply, due to a weak economy and too much construction from when the economy was strong. This is the bottom of the cycle.Vacancy rates will be high and rents would be falling. During this period new construction will cease, while demand slowly starts to grow again.
During phase two new spaces will continue to grow, there will be very little construction and rents rise sometimes sharply. This will cause developers once again initiating the construction of new buildings until there is an equilibrium between supply and demand.
In phase three demand continues to grow and supply grows faster. Rental growth could slow down.
The final phase brings the market to a point of oversupply, due to over - building, with the condition aggravated by the economy weakening.
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