Probably most of you think about residential real estate when they hear and consider real estate investing. That’s definitely the most popular type of rental real estate at the moment, but another type is fast growing in popularity: namely, commercial real estate for rent. Many real estate investors are repelled by the idea of investing in commercial real estate because they believe it requires a lot of money and expertise, so it is better left for the top real estate experts. While this might be partially true, the ever-increasing variety of financing options for real estate investors is turning commercial real estate for rent into a viable option for beginner investors without much cash too.
So, if you are a real estate investor looking for an alternative to residential real estate for rent in order to diversity your real estate investment portfolio or just because you don’t feel like dealing with residential tenants, you should give commercial real estate investing a thought. This naturally summons the question: What is the best commercial real estate market to invest in at the moment? Luckily for you, there isn’t just one top commercial real estate market in the US, but there are a few markets which offer excellent opportunities for investors. Let’s have a look at them.
Related: What Are the Hottest Commercial Real Estate Trends in the US This Year?
What makes for the best commercial real estate market?
But before we go into specific cities in our search for the top commercial real estate market in the US nowadays, it is important to define what we mean by “the best commercial real estate market”. Well, that’s basically a commercial real estate market which offers high return on investment to owners of commercial buildings, regardless of whether these include offices, retail space, industrial space, or multi family complexes. Such a commercial real estate market is characterized by:
- Low commercial real estate property prices;
- High and increasing commercial asking rents;
- High commercial tenant demand;
- Low vacancy rates;
- Strong and growing economy;
- Low unemployment rate.
Your profit – or return on investment – is the difference between the purchase price of your commercial real estate property and the rent which you can collect from it on monthly basis. Thus, high profitability is the result of low property prices and high rent, and while you might think it is impossible to find a commercial real estate market which offers this successful combination, it totally is possible, as demonstrated by the list of markets below. If you want to be a commercial real estate investor, you should look for locations with a strong economy, where businesses are flourishing and unemployment is low. After all, your tenants will be businesses, and you want them to be doing well so that they can pay you high rent. If the economy is doing well, you can also expect more businesses to relocate there or new businesses to open up, so vacancy will never be an issue.
Related: What Are the Best Ways to Make Money in Commercial Real Estate for Rent?
What are the top commercial real estate markets in the US now?
It’s now time to take a look at the 10 best commercial real estate markets in the US at the moment, according to data from FortuneBuilders.
1. San Francisco, CA
It is no surprise that San Francisco is the best commercial real estate market to invest in right now. Not only the average rent price per square foot for both office space and retail space is the highest nationwide, but it is also growing well. The booming economy in San Francisco is pushing both the commercial real estate market and the residential real estate market to blossom, making San Francisco an ideal location for property investments.
2. Oakland, CA
Another city in the State of California – Oakland – is the second top commercial real estate market to buy and rent out in across the US at the moment.
3. San Jose, CA
As you can see, California can easily be pronounced as the best commercial real estate market at the state level as it hosts the three top markets in the US currently, the third one being San Jose.
4. Miami, FL
Moving from the west to the east but still remaining in the south, Miami is #4 as a top US commercial real estate market to invest in. The strong tourism sector is definitely creating a lot of demand for retail and office spaces.
5. New York City, NY
Manhattan is the largest centralized business district around the globe, which means that demand for commercial real estate properties is huge. Moreover, the financial, consulting, law, insurance, media, retail, fashion, and sports businesses located there are able and ready to pay rental rates way above the levels in other major US cities. If you are looking for a commercial real estate market to invest in for the long term, New York City promises to remain a top destination in the coming years and decades.
6. Palm Beach, FL
If you still haven’t found your commercial real estate market to invest in, how about Palm Beach? The rent prices are high, while unemployment is low.
7. Austin, TX
Austin is home to the headquarters of many high-tech corporations, which gave it its name “Silicon Hills” and which definitely is a deciding factor in turning into one of the hottest commercial real estate markets in the US at the moment.
8. Charleston, SC
The south is dominating the US commercial real estate market for investments at the moment, no? Charleston is yet another great location to buy and rent out commercial real estate properties if you are looking for high profit.
9. Louisville, KY
Louisville is home to many companies and organizations within various industries, and this diversity makes it a top location for your next commercial real estate property purchase.
10. Los Angeles, CA
Last but not least, another California city is #10 according to the data from FortuneBuilders in our search for the best commercial real estate market in the US to invest in right now – Los Angeles.
Related: Is Investing in a Residential or Commercial Property the Better Real Estate Strategy?
Whether you are a new or an experienced real estate investor, you should give commercial real estate investing a thought. It is very different from investing in residential properties, so it will require a new set of skills and qualifications. However, the major profits which it promises if conducted properly make this learning process totally worth it. So, do consider these top 10 markets for commercial properties for your next real estate investments.
Regardless of whether you decide to go for residential or commercial real estate investing, keep reading on Mashvisor for more advice and tips.