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Build Your Commercial Portfolio: Where to Invest

Commercial Corner: Diversifying Your Commercial Real Estate Portfolio

As the economy improves nationwide, Arizona is paving the path for commercial investment portfolios and green development projects. Remember to work with an experienced commercial real estate broker when doing your research.

Here are the different commercial sectors worth consideration as you grow your investment portfolio:

1. Apartment Complexes

Invest in Apartment Complexes to Build Commercial Real Estate Portfolio

Apartments are stronger than ever due to the large residential foreclosure surge that began several years ago. Because of credit requirements and a more conservative residential loan process, there are a lot of individuals that continue to need economical housing options. In addition, vacancy rates in apartment complexes are now at an all-time low. Make sure that you have your commercial specialist pull and provide a three-year history on the vacancy rate for the property; however, keep in mind if the occupancy rate is consistently high, look at the potential in the area, and take that into consideration.

2. Industrial Buildings and Complexes

Industrial buildings are becoming the new black in real estate investment portfolios. They continue to be a popular target for investment as jobs, residential housing and new building start rates begin to come back and stabilize. Industrial jobs and the need for industrial space will continue to increase as the economy moves in a positive direction. New technology businesses are a great target for industrial buildings as they demand more space for call centers and staff.

3. Retail Commercial Space

Retail space took a big hit because local businesses were forced to close due to the lack of local spending caused by the economic downturn. As local companies begin to re-enter the retail commercial space, they will be looking for good locations that are economically priced. A trend with new retail brick and mortar stores has started to rise as they strive to find locations that are more neighborhood niche focused and/or located in cozy commercial cul de sacs.  Buildings that have more character and patio possibilities seem to be getting more attention from retail outlets.

4. Office Space

Diversifying your commercial real estate portfolio in Phoenix, AZ; Photo: Flickr, alexliivet

Office space is always in demand, however the key to finding good office locations is to do a solid area check to make sure that the office space is in a good traffic area, and there should be an easy ingress/egress by way of freeway or main street. Office space is a privilege for most and again our recovering economy is forcing businesses to hire and expand, which means they will need

more office space. When looking to add this piece to your portfolio, parking in these structures is a plus, so make sure your parking space ratio is high and make sure your broker asks for more parking spaces in the property negotiations.

When looking for these different commercial sectors remember to keep these three important factors in mind:

1. Check for job growth in the immediate area with your local economic reporting office.

2. Location, location, location
You need to look for convenience, functionality, and stay away from the areas that have undergone functional obsolescence or are simply outdated for modern use.

3. Look for strong anchors and local businesses that draw commerce into the neighborhood such as big box stores or smaller niche retail outlets.

Above all, always remember to find a commercial real estate broker that works and thinks along these terms. Use them as a resource and create a winning team to make your investment project successful!

[stextbox id=”grey”]These tips are provided by Pete Baldwin, Designated Broker and Owner of Platinum Realty Network with offices in Scottsdale and Flagstaff, Ariz. With over 25 years of experience in business and real estate, Pete specializes in country club communities and second home investments, including large commercial portfolios. He also owns an Arizona branch of a family-owned, Montana-based company Baldwin Log Homes – Arizona Territory and has become the area leader in full- custom, handcrafted log homes in Northern Arizona. For more information, please visit www.PeteBaldwin.com.[/stextbox]