With serious concerns of a recession, is 2023 going to be a good year to invest in commercial real estate? 2022 was a banner year for commercial real estate investing, defying the gloom and doom predictions, but what about 2023? Discover who the big winners (and the big losers) are going to be in 2023 commercial real estate investment.
Is 2023 a Good Year to Invest in Commercial Real Estate?
Well, that depends whether you are on the winning side or the losing side. On the winning side, investors are using capital to purchase life changing commercial real estate deals. They are countering high interest rates with creative financing and value-add strategies. And by investing in cash-flowing assets they are beating inflation. For investors on the winning side, life goes on as they continue to build wealth in today’s commercial real estate market.
Unfortunately, those on the losing side are waiting on the sidelines scared. They are waiting for interest rates to fall, inflation to be checked, and for the economy to bounce back. They're also getting all their information from media, who are not commercial real estate investors. The losing side is letting the media dictate what they do with their life and the result is life is on hold.
I have a cousin who was diagnosed with cancer last year. Thankfully, the doctors declared him cancer free this fall. He gave a speech at Thanksgiving that was so spot on. What he told us was, don't wait. His advice was that if there's anything you want to do in your life, don't wait because life won't wait for you. So take his words to heart and don't wait to start building your financial future by investing in commercial real estate.
2022 - A Banner Year
At Commercial Property Advisors 2022 was a banner year! Here are just three examples of investors in our Protégé Program on the winning side:
- Multi-Million Dollar Apartment Deal: Jacob was a waiter just out of college when purchased his first commercial property. You can find out more about his amazing story and how he purchased a 90-unit apartment with no money down here: Waiter Buys 90-Unit Apartment No Money Down. His inspiring true story proves that all it takes is one commercial real estate deal to completely change your life!
- Building a Self-Storage Business: Dean was a burnt-out corporate guy who escaped the rat race. He took a leap of faith and transitioned full time into commercial real estate and over the past two years, Dean has acquired 3 self storage properties. Learn how he did it and the incredibly valuable lessons he has learned along the way here: Building a Self-Storage Business in Today’s Market.
- Value-Add RV Storage: Sam is an engineer in Silicon Valley and could see that his job and other investments would not provide adequately for his retirement. He realized that only commercial real estate can produce enough cash flow to accomplish his goal of financial freedom. So Sam purchased an ugly property and using value-add strategies he will create a beautiful retirement for himself and his family. To learn more about the RV storage Sam acquired and what a life changer it is, check out his video here: Beautiful Potential in Ugly Commercial Properties.
All three of these investors didn’t wait to begin securing their financial future. We have many more success stories of proteges in 2022, and as a company we look forward to having the same impact in 2023.
False Commercial Real Estate Market Predictions
There were a lot of predictions of doom and gloom for commercial real estate in 2022 that didn’t happen. Despite seven interest rate hikes over the last twelve months, the commercial real estate market remained stable. Many of you thought that interest rate hikes were the death of commercial estate investing but it wasn’t. We didn't think it would happen, and it didn't because the demand for commercial real estate is still high. Everyone needs a place to live, to store their things, and a place to conduct business.
Also consumers are adjusting to the higher interest rates as a fact of life now. And we aren’t going to let high interest rates stop us. Remember we are on the winning side; interest rates don’t stop us, we just adjust.
Finally, the commercial real estate market has remained stable because it’s the best option for investors. Where else can you invest? Are you going to invest in single family homes and watch your equity disappear? Or get into crypto and watch everything explode? The fact is, commercial real estate is the best investment vehicle to build wealth right now.
So the doomsday predictions didn’t happen in 2022, but what does 2023 hold for commercial real estate investors? Here are our predictions for 2023:
Winners in 2023
Apartment Investors: We have the privilege of working with investors from coast to coast. This gives us market data from across the country and allows us to track the trends. In the last quarter of 2022, we had several students that locked in interest rates on their apartment buildings at a lower rate than for a single-family home. This is highly unusual, and it indicates that lenders have greater confidence in commercial real estate than residential. The lender sees an apartment building as a lower risk than a single-family home, which gives the commercial investor preferred lending.
Mobile Home Parks: Mobile home parks are a great commercial investment; high demand and low supply, with high cash flow and low volatility.
Storage Industry: This includes self-storage, RV storage, and industrial warehouses. Based on our research and experience in the last year, we are bullish for storage assets this year. Not only us, but also Wall Street analysts are recommending storage asset in a 2023 recessionary environment. They believe that RV storage, self storage, and industrial warehouses will be strong assets to invest in this year.
Losers in 2023
Class A Office Space: Investors of Class A office space will be losers this year. I'm in California, and in the downtown of my city we have a 28% vacancy rate in class A office space. The downtown core looks nothing like it was in 2019. It is somewhat of a ghost town now. Downtown office space used to be the most coveted office space and now we have a 28% vacancy rate, and in my city alone there are 1300 leases of class A and B office space set to expire. That's going to cause some pain. I would think twice before investing in office space.
Shopping Centers without a Grocery Store Anchor: From what we've seen around the country, shopping centers with a large footprint without a grocery store as an anchor will probably struggle in 2023 and beyond. With all the online shopping, I'm not bullish on shopping centers now if you don't have a grocery anchor.
Aggressive Syndicators: A lot of apartment syndicators don't have the necessary experience. They can pull money together and buy apartment buildings but they’re being too aggressive in what they pay and with their rent projections. They are overpaying and then hoping to increase the rents enough to compensate and increase the value to make money for the investors. The strategy is good, they're just doing it too aggressively. What they need is an experienced mentor. Without it, these overly aggressive syndicators will struggle.
Those Sitting on the Sidelines: Those people waiting for the perfect time to jump into the market are the losers in 2023. They're waiting for the commercial real estate market to fall drastically. However, that's not going to happen. It may decline a little, but it will not crash. So the people waiting on the sidelines are the losers because life will pass them by. Unfortunately, they will end up old people with nothing. They need to act now and to be on the winning side.
Don’t sit on the sidelines, get help investing in commercial real estate, like Jacob, Dean, and Sam by applying to our Protege Program here: https://www.commercialpropertyadvisors.com/protege-program/