Commercial Real Estate Buildings Part 2 —Current Economic Outlook

More commercial real estate building types

As published earlier, this is the second half of the current economic outlook update for commercial real estate buildings.

Mixed Use Investments
An investment in a mixed-use building is simply an investment in a building that has multiple purposes. This could be a combination of residential, office, retail or industrial. Mixed-Use investments are a niche category in that the formulas used to predict long-term financial success do not always apply. With market fluctuations and variables including not knowing how the combination of uses will work together, these investments can be extremely risky.

According to National Real Estate Investor, lenders face significant challenges in underwriting these projects. However, the number of mixed-use projects built nationwide have more than tripled since 2003. If you are considering investing in a mixed-use building, make sure to do your homework. If it is a pre-existing structure with tenants, look at the current ROI and financial soundness of the arrangement. Many mixed-use buildings with condominiums may have condo owners with questionable financing due to the lending occurring in previous years.

Seniors Housing
Seniors housing includes apartment buildings with age restrictions (like a retirement community), assisted living facilities, skilled nursing facilities, memory care facilities and continuing care retirement communities. According to National Real Estate Investor, a recent survey showed that assisted living facilities are predicted to experience the most growth in the next three years.

With the baby boom generation approaching retirement and changes to Medicare fast looming, it makes sense that this arena would experience significant growth in the years to come.

Hotels
Investments in hotels are investments are in buildings that accommodate several people in individual units on a temporary basis. This sector also includes extended stay buildings.

With the recent credit crisis, many experts are predicting this arena will soon hit rock bottom according to National Real Estate Investor. With Revenue Per Available Room (occupancy and revenue metrics) projected to decrease 13% over last year according to a national research firm, the industry is not expected to be out of the red line until at least 2011.

With the current economic situation, budgets are tighter for both personal and business travelers. With other technology-based solutions like webinars and video conferencing, the push for trade shows and conventions has waned.

However, the hotel industry is well versed in using less to accomplish more. They have become more efficient with staffing, food and beverage offerings and using technology to cut costs.

So, should you invest in a hotel? Like every other sector, do your homework. If the offering is right and the risk fits your portfolio, you could stand to turn a profit.

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