Commercial Real Estate Bargains in Massachusetts

In a recent article we discussed some of the top performing commercial real estate sectors for 2013. Now let’s dig in deeper and look at the best property types, location and how to find higher returns in individual deals than the competition for commercial real estate investors.

It’s no secret that Massachusetts has a lot going for it in the new property rebound and that pretty much all sectors have something going for them.

Retail certainly has its pluses and is commonly one of the first to rebound. So which property types in particular might make good investments for 2013 – 2014?

According to a new report on commerce the following 5 categories are pegged for the best growth ahead:

  1. Fitness and health
  2. Drug stores
  3. Thrift stores
  4. Grocery stores
  5. Fast food

Of course the more activity we see in the housing sector and business relocation the more retail benefits too. Those with an eye on MA, will certainly have noticed some of the most attractive spreads and best investment opportunities among Worcester’s multifamily property market. There are still distressed property opportunities now and those that get in and position their building well in a given niche have much to gain.

Leasing multifamily apartment buildings will become even more profitable for Worcester County landlords as businesses expand and relocate outwards too.

Office is anticipated to be one of the hottest commercial real estate sectors, with the most growth potential ahead.

Boston is widely accepted to be one of hottest markets for business today, but it is also troubled by limited availability and being one of most expensive office markets. Surrounding suburban areas can offer rents for less than half that, and cheaper corporate housing too.

According to market data from one of the commercial real estate industry’s most respected analysts downtown Boston office asking rents stood at $42.97 per square foot at the end of 2012, while suburban spaces were asking just $19.58 a foot.

Rents in areas like Worcester. MA will also naturally rise faster along with property values over next few years as more movement occurs in the market, dramatically increasing overall total investment returns.

The significant uptick in demand for commercial investment properties over the last couple of years has certainly already caused frustration for many investors hungry for more yield. But those that look to the outskirts of gateway cities like Boston and new emerging hubs for growth, and that know how to find larger spreads than the competition can still find winning deals.

According to the National Apartment Association multifamily apartment building owners spend almost $70 billion a year on operations. 42.8% of this goes towards building services. 27.4% to management, and 14.3% on repairs and maintenance. That’s 84.5% of expenses (not counting debt service).

So even a minimal 10% improvement in efficiency and profitability in these 3 factors would essentially building in an 8.5% improvement in cash flow and returns each year.

Clearly the easiest way to accomplish this is to hire a professional property management company if you haven’t already. Choose full service property management, and choose a quality firm and you’ll find they not only pay for themselves but make a direct difference to both the top and bottom line as well.