With the United States economy outperforming many economies, including the Eurozone Area, the United Kingdom, Latin America, and Canada, the U.S. remains a favorable destination for business, investment, and residence.
Commercial real estate is a booming industry. According to Real Capital Analytics, 2015 saw $533 billion in CRE sales in markets across the United States—up 23 percent from 2014. Newcomers to commercial real estate investing may wonder where these properties are being purchased and how other investors are selecting these markets. The following factors, market data, and future trends are intended to provide a starting point for investors to begin evaluating and understanding commercial real estate markets across the United States.
A “REIT” refers to a Real Estate Investment Trust, which is a type of security. The REIT is basically an investment vehicle that owns real estate that produces income. Such real estate is also known as commercial real estate and might include, for example, hotels, offices, or warehouses. A REIT is not like a traditional real estate company: it does not develop properties with the goal of reselling them. Instead, a REIT purchases and develops real estate properties in order to run them as a part of its investment portfolio.
Commercial real estate investing generally involves greater start-up costs than residential real estate (such as buying a house for the purpose of renovating and reselling it) because the prices of commercial properties are higher. Also in contrast to residential real estate, the usable square footage of a commercial real estate property affects its income potential: more square footage means more potential income.
Commercial real estate is property that is used for business purposes. In other words, it is property owned with the purpose of producing income. Commercial real estate investors make money by leasing their space to tenants and collecting rent. These leases vary in duration, with the terms depending on the type of commercial real estate space being rented out. Commercial real estate encompasses a wide range of properties, from the local gas station to a city center skyscraper. There are six major categories of commercial real estate spaces.
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