Commercial Real Estate Better, Safer Than Stocks
Commercial real estate has become the fourth largest asset class in the United States behind stocks, bonds and cash. Over the last few decades, however, institutional investors represented only 10 percent of their holdings with regards to investments in commercial properties.
The typical individual investor's portfolio revealed that there was often a big hole where commercial real estate is tackled. According to NAIOP, for most investors, this particular asset class is relatively unknown.
Previously, strict barriers to entry made direct commercial real estate investments only available to a specific group. Fortunately, real estate crowd funding has made it possible for a broader set of investors to have access to this valuable part of the real estate market.
Commercial properties have generated income in the form of rent from tenants and pay when the property is bought. Investors realized returns from property income, less any operating, maintenance and financing costs.
Commercial real estate had set itself apart from other investment forms on several points. Many of the counts that made it unique were also what made it appealing to investors in the first place. There were various key areas where commercial real estate outperformed other asset classes.
The most dynamic area was volatility, according to Forbes. The stock market had been unpredictable even on the better of days and as economists have seen over the last few months, real estate tended to be more solid. From a global perspective, certain American real estate markets became a safe haven for international investors trying to escape the troubling Asian financial markets.
Compared to stocks, commercial real estate has offered more in terms of movement. Since returns were derived from rental income with price appreciation, commercial real estate often proved to be a safer investment during times of volatility.
Commercial real estate is defined as any property designed to produce income. This covers everything from office buildings and apartment complexes to shopping malls and industrial areas.