Where to Invest Your Money for the Next Upturn in Commercial Real Estate
The Urban Land Institute recently asked 700 real estate professionals to name the best (and worst) places to invest in commercial real estate in the coming year. Those surveyed included private developers, real estate brokers and Real Estate Investment Trust (REIT) executives. Their answers also apply to the residential market, since the single-family-home sector typically follows the economy. As wages go up and there are more jobs, more people can buy homes, pushing prices up.
The best cities in which to invest are those that are considered gateways to international investment, have vital downtowns where people can forgo cars, and don't have a glut of condos or office space.
According to this survey, the number one place to invest in commercial real estate right now is Seattle. Seattle is a diversified market, has a good base of business and is becoming a 24-hour city.
Although the city is suffering from the loss of Washington Mutual and the downsizing of Starbucks, Boeing and Microsoft are still relatively strong. Apartment vacancies are low and there aren't too many new buildings going up, meaning the market won't be oversupplied. The same is true in the retail space.
San Francisco comes in second in the survey as the best location to invest in commercial real estate. San Francisco learned from the tech crash of 2001 not to overbuild. There is a reasonable supply of office and apartment space, which should limit vacancies. San Francisco's port is also expected to help the city during the downturn as Americans continue to rely on Asian imports.
Washington, D.C., New York and Los Angeles round out the top five.
The least attractive major city in America to commercial real estate investment is Detroit, Michigan. Detroit has been reliant on the car industry, which is rapidly shrinking. Other businesses are unlikely to fill the void in the next few years, which means the city will be hit hard by further economic struggles.
The second worst city was New Orleans. The city has been losing businesses to Houston, Dallas and Atlanta since Hurricane Katrina hit in 2005.
The other cities at the bottom of the list — Columbus, Ohio, Milwaukee, Wis., and Cleveland — suffer from dying industries and lack of tourist appeal.
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