CRE (Commercial Real Estate) investments are a great way to ensure a steady passive income. While mostly used for its stability across long-term investments, CRE comes with its own appetite for varying risks and returns. What matters is which one you choose to invest in. With a wide range of assets across the spectrum of commercial real estate, it can be difficult to pinpoint the ones that offer the best benefits.
Commercial office space always comes first when speaking about investment options in CRE. That might sound odd for 2021 considering the lockdowns going on and the extreme WFH options provided in most corporate structures. But, the demand for office space has remained rather stable, with new projects also due to be completed on schedule. The vacancy rate has increased, yet, has stayed below the 15% mark. As of March 2021, the Grade-A office stock in the top seven markets in India stands at 641.6 million sq. ft. Rentals have remained stable. It is expected that the commercial segment will drive the demand in the future, but as of March 2021, IT and ITeS have been running the show for demand generation.
Warehousing is the next big thing on the horizon in CRE. E-commerce and manufacturing will be the key drivers for demand in this asset type. While the warehousing sector hasn’t seen the same resilience, it is on the road to recovery with increased sales and demand. Some of the developers and owners of warehousing segments are offering lucrative pre-leased deals for investors to earn a return on investment of around 8-10% per annum. This is especially seen in the markets of Maharashtra and Delhi.
The natural offshoot for increasing demand in office spaces and warehousing locations is demand for parking lots or land. This demand is dependent on the more major demands of offices and industrial/manufacturing spaces under warehousing.
Retail spaces will need some more time to come back to prominence, at least till free movement of people is allowed in public spaces. If the vaccination drives increase and the impending waves of further infection are successfully restrained, retail can gain back some of its lost integrity in terms of an investment option.
Hospitality and travel will come in last on this list. There is a lot of work to be done before the travel and hospitality industry will generate any demand in the CRE space. It is understandable from the fact that the restrictions on travel currently are contributing to this. But once the pandemic is brought under control, investors are also cautiously optimistic about the investment returns in the segment to quickly jump back to normal.
In closing, while these are the asset types that you can keep a tab on; for the near future, a more benefitting portfolio should focus primarily on assets that deal in Grade A commercial office spaces and warehouses/industrial floors that can aid in better supply chain management and manufacturing. If you want to keep a close watch on what kind of assets are picking up pace, we would like you to follow us on www.strataprop.com. for the best assets available for investment via fractional ownership.