Ready to Buy a Business Property? While residential real estate slows, the commercial market remains fairly healthy. Is now the time to buy?
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Some entrepreneurs are content to rent space for their businesses year after year, but others have been anxiously watching the residential housing market, hoping for an opportunity to take their commercial lease dollars and turn them into long-term equity in the real estate market. But will the residential bubble's slow leak (or impending collapse, depending on whom you talk to) make the next one to two years a good time to purchase commercial space?
First off, know that the residential and commercial markets don't move in tandem; while the former has slowed dramatically, the latter is still fairly robust. The commercial market also depends heavily on the particular region and type of product. While office and industrial properties are expected to see improving market fundamentals in 2007, for example, the retail market has seen some overbuilding, leading to a softening on that front, says Rick Davidson, president and COO of Coldwell Banker Commercial Affiliates Inc., based in Parsippany, New Jersey.
That said, the decision depends heavily on why you are buying. If you are hoping to turn the property over for an immediate profit, now is a particularly risky time, says Craig Thomas, senior vice president at CB Richard Ellis in Salt Lake City. "But over a long-term holding period, the outlook for rent gain and income gains are rather strong," he adds, "so you're going to do OK with a 7-year or 10-year hold."