Real estate has always been a sought after investment portfolio. This is not only because of the potentially high returns but also the corresponding status of ownership.
But every investment in real estate does not fetch good returns: residential and commercial real estate respond differently to situations.
Increasingly, Commercial real estate (CRE) is becoming the favourite for investors - Institutional and private. This is largely because of CRE’s predictable returns and the fact that it allows the investment portfolio to be diversified and hence safeguard from the volatility of the market.
Institutional investors, in particular, are more drawn to CRE investments. Armed with decisions made by asset managers and investor analysts, CRE portfolios are faring better. This is also true since this practice now eliminates ad-hoc pricing by local property managers out of the equation.
CRE investment in such a case is seen as a cold, calculated affair with metrics firmly entrenched in revenue and cost centres. This is in turn has a ripple effect specially with standardisation practices setting in which to an extent make negotiations with smaller tenants less desirable and easier.
However, investing in CRE isn’t quite a cakewalk. There are several thumb rules to consider before venturing into a CRE portfolio investment. Few of these include elementary basics like Location, the Demand- Supply curve, the problems of rent and its variations, fitouts and management, and of course, Diversification.
In this article in the Economic Times, Kunal Moktan discusses in detail on the ten rules of commercial real estate investing