According to the Self Storage Association, approximately 10% of U.S. households currently use self-storage properties. Self-storage facilities have become increasingly popular in recent years due to the growth of the sharing economy, urbanization, and downsizing. According to research, the self-storage market in 2019 was valued at $87.65 billion USD. This valuation is anticipated to increase to $115.62 billion by 2025. This results in a compound annual growth rate of 134.79 percent from 2020 to 2025.

While revenue in the self-storage industry can be impacted by a variety of factors, the industry has shown consistent growth over the past five years, making it an attractive investment option for many investors. According to data from the National Association of Real Estate Investment Trusts (NAREIT), the self-storage sector has experienced steady revenue growth over the past five years. In 2016, the self-storage sector had a total return of 18.45%, followed by a return of 9.04% in 2017, 4.20% in 2018, 18.32% in 2019, and 5.15% in 2020. We anticipate the ROI on self-storage will continue to rise in the coming years as the market bounces back from the effects of the COVID-19 Pandemic.

Before investing in self-storage, it’s essential to have a thorough understanding of the market. Research industry trends, such as the increasing demand for storage space due to factors like urbanization, downsizing, and the rise of e-commerce. Analyze local market conditions, including population growth, income levels, and housing trends, to identify areas with the potential for high self-storage demand. 

What Factors Make Self-Storage a Strong Investment?

• Self-storage is always in demand: When the economy is booming, households take longer sabbaticals and move homes, requiring self-storage. During a downturn, people may be returning to school or downsizing, which means they may turn to self-storage as they adjust their housing situations. Construction lag times have contributed to a lack of recent development, so we are now seeing undersupplied markets, especially in the Southeast.
• ROI is more straightforward: While self-storage properties aren’t quite a completely passive investment, there are fewer hands-on challenges than with other types of commercial real estate. Owners and property managers don’t have to deal with unexpected calls from tenants to resolve issues like leaky pipes or clogged toilets. That simplifies things when calculating your return on investment.
• Low expenses: Unlike some types of investment properties, self-storage capital expenditures are low. Lower expenses are always an advantage, and this is yet another reason that cash flow can remain steady even as other factors change.
• Financing for self-storage investment properties is accessible: Self-storage properties have shown themselves to be something of a “COVID-resistant” asset, so lenders are eager to get them on their books. So, if you’re interested in exploring this area of industrial property investment, you probably won’t have any issues finding financing at a competitive rate.
• Self-storage properties provide a reliable stream of income: Self-storage facilities vary widely in size, but the average number of units in a facility is around 500. With this many separate spaces for rent, your income stream is not dependent on collecting rent from just a few tenants. So if a tenant or two leaves, your cash flow will not be dramatically altered. Plus, with self-storage units in such high demand, it is not difficult to find new tenants to replace the ones that leave.
• Self-Storage Rent Increases Have Less Pushback: Inevitably, rent increases will be necessary to keep your self-storage investment profitable in changing markets and tenants bristling against these rent increases can seem unavoidable. But the advantage of self-storage is that leases tend to be shorter. Most tenants will be on a month-to-month schedule, which makes it easier to raise rents more frequently without tenants pushing back against the increase. Being able to adjust rent more often and more easily also allows you to keep your income stream pretty consistent if you experience frequent tenant turnover.

What Factors Determine Self-Storage Investment Success?

• Location: Look for commercial properties for sale in areas with high visibility, easy accessibility, and a growing population. Proximity to residential neighborhoods, apartment complexes, and businesses can help drive demand for storage units. Usually, 90% of your customer base will be within a 1-5 mile radius of the storage unit. Is the area growing or shrinking? Is the city expanding in the area or away from the area? It will be a safer investment if the homes and apartments in that area are small as your self-storage facility will . That means the people living in them will have a bigger need for additional space to store their belongings, which is where your self-storage facility can help.
• Size: Facilities vary in size and can range from 10,000 square feet to 100,000 square feet or more. The average rentable square footage is around 46,000 SF. A facility will take up anywhere from 2.5 to acres of land. The size of the self-storage facility will dictate many things including the cost of maintenance, property taxes, and management.
• Demand: Square feet per capita and price per square foot are important to understand the level of competition in your area. A higher number per person, within a facility you’re considering investing in, or in your market as a whole, might mean in terms of supply and demand, there’s not enough demand. If the prices per square foot in all of the facilities that you’re considering investing in are high, that’s another sign of healthy demand.
• Consumer Behaviors: Offering a mix of storage solutions can help attract a wider range of customers and ensure consistent occupancy rates. In addition to traditional storage units, having climate-controlled units, vehicle storage, and specialized storage options for wine, artwork, or documents helps diversify your offering mix. Also, considering changes in consumer behaviors, such as increased reliance on e-commerce and online marketplaces, can impact the demand for self-storage space. 
• Management: Is the property managed by the owner or a management company? Are you going to self-manage or hire someone? Effective marketing and management are crucial for the success of your self-storage investment. Utilize digital marketing strategies, including search engine optimization (SEO), pay-per-click advertising, and social media marketing, to increase your facility’s online visibility and attract potential tenants. Implement a robust management system that includes customer service, regular maintenance, and efficient billing processes to streamline operations and improve tenant satisfaction. 
• Occupancy Rates: If the occupancy rates in the storage facilities in your area are in the 90-100% range, you can safely assume you’re looking at high demand. Whichever route you choose, if the vacancy rates are low, you can be confident you’ll find customers. If you’re investing in a facility, you’ll want a high occupancy rate.

Consult An Expert

When you’re ready to have a conversation with a broker about self-storage investment, the team at Sands Investment Group can help. We have facilitated transactions of many self-storage facilities across the country, ensuring that investors not only find the right opportunity but get the best deal when adding to their portfolio.  

Investing in self-storage can be a lucrative opportunity for real estate investors seeking stable cash flow and portfolio diversification. By understanding the market, selecting the right location, diversifying offerings, implementing technology and security features, and focusing on customer service, you can maximize the return on your investment and set your self-storage facility apart from the competition. Consult an expert at Sands Investment Group today.

What does “owner-user” commercial real estate mean? Are you considering taking that next step with your business or portfolio and investing in commercial real estate?  Keep reading to learn why it may be a smart choice for you as a small business owner. 

Understanding Owner-User Commercial Real Estate

A commercial real estate property that the owner intends to occupy and operate their business from is commonly called an owner-user property. These properties can be warehouses, office buildings, retail storefronts, and more. Unlike investment properties that are solely for rental income purposes, the distinguishing factor is that the property is for the owner’s operating use, with any additional rental income serving as a bonus.

Let’s say you’re a small business owner who runs a bakery. You’ve been leasing a commercial space for a few years, but now you’re ready to invest in a property that you can operate your business from. You come across a commercial real estate property for sale that was previously a retail storefront. The property is in a great location with high foot traffic, ample parking, and a reasonable asking price. After doing your due diligence and consulting with a commercial investment advisor, you decide to purchase the property and convert it into your bakery. Congratulations, you are now a small business owner with an owner-user commercial real estate investment. Why did you make the decision to purchase instead of lease?

Benefits of Owner- User Property for Small Business

Cost Savings

One of the main advantages of purchasing and investing in a commercial real estate property as an owner-user is the potential for cost savings. Leasing a commercial space means you are subject to rent increases and the landlord’s control over the property. In contrast, owning the property allows you to control your costs, avoid rent hikes, and enjoy long-term stability. Additionally, when you purchase your property, you can build equity over time instead of paying rent to a landlord.

Commercial owners can also benefit financially by deducting the interest on a commercial real estate loan or writing off other building-related expenses and investment on their taxes.

Customization

Owning your own commercial real estate that you operate out of also means you have the ability to customize the space to suit your business’s unique needs. When you lease a commercial space, you may be limited in your ability to change the property. On the other hand, owning the property gives you greater control over the space’s design, and modifications. As an owner you also increase equity on any improvements you make to the property. 

Stable Location

When leasing, landlords can decide to sell or increase rent causing potential disruptions in your business, budget or even potentially forcing you to relocate. When you operate as an owner-user, you ensure stability and maintain control of your business and location, allowing you to focus on variables outside of your control that will help you grow.

Financing Opportunities

Finally, being an owner-user will often help secure more favorable financing opportunities than investment properties. Since the property is for the owner’s use, lenders often view the tenancy as more secure and therefore a more stable investment and are able to offer better financing terms. Additionally, operators of owner-user property may be eligible for government-sponsored programs that can provide favorable financing terms.

 

If you’re interested in investing in an owner-user property for your small business, reach out to Sands Investment Group, a leading real estate brokerage firm specializing in commercial real estate investments. Our experienced agents can help you find the right owner-user property that fits your unique needs and can provide long-term stability and financial benefits. Contact SIG today to learn how we can help you make the right investment decision for your business.

 

The dollar store industry has experienced growth over the last five years, as operators adopt new strategies to sustain growth. Total dollar store industry revenue is forecast to increase an annualized 1.6% over the next five years, reaching $109.7 billion. The industry retails general merchandise at a discounted price. The discounted merchandise sold ranges from apparel, food, furniture and home goods. 

Four Major Players In The Dollar Store 

The dollar store industry is characterized by a high level of concentration, with the three largest operators combined anticipated to account for nearly 70.0% of industry revenue in 2022. While the industry is concentrated at the top, the remaining share of the market is mainly composed of small- to medium-sized operators catering to localized demand.

1. Dollar General comprises 34.6% of dollar store market share and annual growth has increased 9.6% in the last five years.
2. Dollar Tree comprises 26.3% of total industry revenue and an increased of 4.1% in industry revenue in the last five years.
3. Big Lots accounts for just 6.3% of total industry revenue and saw a 4.1% increase in industry revenue in the last five years.
4. Five Below only accounts for .3% of market revenue but has seen a 10.5% increase in industry revenue in the last five years

Factors to Consider When Investing in Dollar Stores

According to recent reports, the dollar store sector is experiencing significant growth thanks to its ability to provide affordable products during times of economic uncertainty. By understanding the market trends, you can make informed decisions on where to invest your money. Overall, the combination of these trends has driven growth.

• Population: Population growth is an important component of industry growth. As the population increases, so does the number of potential industry customers. The population is expected to increase in 2022, representing a potential opportunity for the industry.
• Location: Location is a key factor to consider when determining the potential for success. It’s important to choose a location that is in a high-traffic area and caters to the demographic that the store serves. For example, if the store is located in a low-income neighborhood, it should offer affordable products.
• Demographics: The most substantial platform for change within the industry has been its customer base. While the industry has historically targeted low-income earners, this consumer pool has expanded in recent years to include middle-class and even some high-income earners.
• Market Saturation and Competition: Further, expansion in industry product portfolios to include different categories, such as healthcare products, has enabled larger operators to compete with other discount retailers.

Products and Services of Dollar Stores

This segment’s share of revenue has expanded consistently over the last five years as dollar stores have added grocery products to their inventory. Recently operators started stocking national brands of food items as well as some private labels. To increase revenue with existing customers and to attract more foot traffic, industry operators continue to expand their product offerings. It’s interesting to take note of the current products and services to determine where the largest potential for growth may be.

Navigating the market for dollar stores can be complex, and working with a real estate professional can make all the difference. An experienced professional can help you understand whether a nnn lease is the right decision for you, and provide valuable insight into the market. With the right guidance you can confidently invest in the dollar store market and achieve your financial goals.

At Sands Investment Group, we specialize in helping investors find the right investment opportunities in the retail sector, including dollar store NNN investments. Contact us today to learn more about our services and how we can help you achieve your financial goals.

We’re currently seeing a high demand for childcare centers.  The COVID-19 pandemic caused many childcare facilities to close their doors leaving a shortage of childcare centers when the country went back to work. The market share concentration is low and the industry is very fragmented. Only 5.5% of the 120,000+ facilities are made up by the early education “major players”. Connected Real Estate Magazine notes that “childcare is becoming the new anchor tenant for shopping centers and retail properties.” This would mean that this asset class now brings enough traffic to shopping centers to draw other tenants. This is becoming increasingly attractive to real estate owners and investors.

Key Drivers of the Childcare Center Industry Growth

The childcare industry in the United States has seen steady growth over the last 5 years, with an average increase of 4% annually. The current market size is $61B, and expected to reach $100B by 2026. This growth is projected to continue in the coming years due to:

1. The growth in dual-parent working households
2. An expansion in federal subsidies
3. An increase in disposable income
4. An anticipated increase in children ages 9 and under

A Low-Risk Investment Opportunity

If you’re looking for a low-risk investment opportunity, investing in childcare centers is a great place to look. Many factors contribute to the success of investment properties but childcare centers check all of the boxes.

Low Tenant Turnover

They have a lower tenant turnover rate compared to other types of commercial real estate. Once parents have established a relationship with the facility and its staff, they are less likely to move their children from one daycare to another.

Long-term Leases

They have long-term leases, which means a more stable and predictable income as the property owner.

Recession Proof

They are generally recession proof. Even during economic downturns, parents still need to work and continue to require childcare services for their children.

Stable Income

They can generate income through government subsidies. Many parents receive financial assistance from the government to pay for childcare services. This ensures that daycare facilities can enjoy a stable source of income even during tough economic times.

Plus, the tenants are responsible for maintaining the property, which minimizes your maintenance costs.

Ready to Invest in Childcare Centers?

What are we saying? Childcare centers are a growing industry market with high demand and low risk. It could be the perfect investment opportunity for those looking to diversify their portfolio and secure a stable source of income.

If you’re interested in investing in childcare centers Sands Investment Group (SIG) has a team of Early Education experts ready to find the best investment for your portfolio. Contact this crew today to get started.

Let’s hear it for the girls! In honor of Women’s History Month, our team did some digging into stats and sentiments to get a good temperature on the progress of women in commercial real estate. We spoke with Marianne Christian of Sands Investment Group who says,  “To succeed as a woman in commercial real estate you have to be exceptional. When you are a woman in a male-dominated field, you stand out – use that to your advantage“.  

Barriers that Still Exist

Despite the progress made, significant barriers still prevent women from achieving full representation in the commercial real estate industry. These barriers include:

• Gender Bias: It’s true, many women still face gender bias, which can make it difficult for them to advance in the industry. This bias can manifest in many ways, including unequal pay, lack of opportunities for advancement, and being overlooked for promotions.
• Lack of Diversity: The CRE industry still lacks diversity, with many top positions held by white men. This lack of diversity can create an environment that is unwelcoming to women and other underrepresented groups.
• Work-Life Balance: The CRE industry is known for its long hours and high-stress environment, which can make it difficult for women with family responsibilities to succeed in the industry.

Progress for Women in Commercial Real Estate

The past decade has seen the most change in the representation of women in commercial real estate. According to a study by CREW (Commercial Real Estate Women) Network, women now make up 43% of the industry’s workforce, a significant increase from the 36% recorded in 2010.

According to a recent article published in CIRE Magazine, women CCIMs have grown from just 100 in 1984 to over 550. Furthermore, women have made significant gains in leadership roles, with women now representing 33% of senior executive positions in the industry.

What Women Contribute to Commercial Real Estate

We believe we are only seeing the “tip of the iceberg” when it comes to the contributions women will make in the industry. Despite the barriers we face, we can already note many significant contributions: 

• Creativity and Innovation: Women bring a unique perspective to the industry, which can lead to new and innovative approaches to problem-solving. Women bring value to projects with special attention to documentation and personal presentation. We’re not saying the industry is boring, but women will certainly bring a new and fresh perspective.
• Relationship Building: Women are known for their ability to build strong relationships. Being good listeners that are observant and able to pivot conversations when necessary are examples of high emotional intelligence, and qualities that do and will continue to have a big impact on the CRE environment.
• Community Involvement: Many women in the industry are actively involved in their communities. According to a study by the Women’s Philanthropy Institute, women are more likely to volunteer their time and contribute more volunteer hours per year than men. Women’s involvement in volunteering activities is crucial for community development as it helps to build trust and establish long-term relationships and networks while providing essential services to the community.

Factors Making an Impact on Women in Commercial Real Estate

There are many factors that contribute to the growth of women in commercial real estate. We believe these factors are making the biggest impact:

• Mentorship Programs: Mentorship organizations like the CREW Network exist for women in the commercial real estate industry to provide guidance, support, and valuable insights into the industry. Networking helps women to establish relationships and build connections that can lead to career opportunities, partnerships, and referrals. 
• Industry-Wide Recognition: The CRE industry has also started to recognize the value of diversity and inclusivity in driving innovation and growth. GlobeSt’s annual “Women of Influence ” conference celebrates women who drive the CRE industry forward. They discuss critical issues in CRE, what it means to be a woman in business today, and what the industry can do to position itself for a more inclusive future.
• Entrepreneurial Opportunities: Women are increasingly starting their own CRE firms, which provides them with more control over their careers and allows them to create more inclusive and diverse work environments (lowering the ladder down for more women to climb).
• Changing Industry Landscape: The industry is undergoing significant changes, including technological advancements, changes in consumer behavior, and a greater focus on sustainability. These changes are creating new opportunities for women to bring their unique perspectives and expertise to the industry.

We Invite You to Join Us

Sands Investment Group’s core values, Honesty, Integrity, Gratitude, Giving & Growth are lateral to qualities that contribute to women succeeding in CRE. We are dedicated to supporting women in the commercial real estate industry and to equity in the workplace. We strive to create a work environment that is inclusive, diverse, and welcoming to all. We are committed to promoting fairness and equality in all aspects of our business, from hiring and promotion to compensation and benefits. By prioritizing equity in the workplace, we believe we can attract and retain the best talent, build stronger teams, and achieve greater success. 

Join us in our mission to create a workplace where everyone feels valued and respected. Tyler Herzog, our top female recruiting associate would love an opportunity to answer any questions you may have about SIG or a career in CRE.

Sands Investment Group specializes in the buying and selling of investment properties for private institutions and investors nationwide. What separates SIG from our competition is sub-sector product type specialization, a shared company database, a unified team approach, our core values, and a focus on giving back. Our company of distinguished experts brings a proven track record to the table with over 3,900+ transactions in 48 states and $7.6 Billion in commercial real estate transactions—and counting.

 

With continued growth projections for the retail industry, shopping centers can be a great investment as long as you understand what you are investing in and the risks associated. ICSC defines a shopping center as a group of retail and other commercial establishments that is planned, developed, owned and managed as a single property, typically with on-site parking provided.

Shopping centers come in various combinations of size, concept, tenant purpose, and anchor mix. Mainstream media, Wall Street and the general public don’t have a set classification system to follow because the industry doesn’t have an agreed upon system to categorize shopping centers. Inherently complex and difficult to understand, ICSC has developed a classification table with typical characteristics they are hoping the industry will adopt. We’re not quite sold on this system.

Types of Shopping Centers

Malls

The most identifiable of the various types of shopping centers, typically enclosed buildings with a central corridor and with one shared roof are malls. Key components that help categorize a shopping center a mall:

• 400,000 – 800,000 sq. ft. of commercial space (although there is no actual limit to the size they can be)
• At least 2 anchor tenants (typically national department stores)
• House food courts or full-service restaurants
• Apparel makes up a sizable portion of the general products sold 

The growth of e-commerce has made it difficult for many malls to remain competitive. However, many malls are increasingly relying on fresh approaches to draw customers, such as providing more experience shopping options and including other forms of entertainment, like restaurants and movie theaters.

Neighborhood Centers | Community Centers

Neighborhood Centers typically get thrown into the category of what people refer to as strip malls. A strip mall is a collection of retail stores and other businesses that are designed, built, owned, and operated as a single building with on-site parking. Key components that help categorize a shopping center a Neighborhood or Community Center:

• 30,000 – 400,000 square feet in size
• Have one to two anchor stores
• Provide daily necessities and personal services such as grocery, apparel, drugstores, tailors, dry cleaners, or cell phone stores

Because they often include local “mom-and-pop” businesses with less of an established reputation, community centers —along with neighborhood centers and convenience centers —pose a higher risk for lenders and investors. Having strong anchor tenants can mitigate this risk.

Power Center | Big Box Stores

The defining characteristic of power centers are that they are made primarily of anchor stores. Typically 75% to 90% of available retail space in Power Centers is dedicated to anchor stores. Name brand grocery stores, discount stores, super drugstores, and home improvement stores are examples of typical big box store anchors. Key components that help categorize a shopping center a Power Center or Big Box Store:

• Retail space ranging from 100,000 – 300,000 square feet 
• At least three anchor stores
• Pad sites typically include fast food or other eateries in their parking lot

Other Shopping Centers

Shopping centers that can’t be classified in the previously mentioned shopping center types, are factory outlets, mixed-use retail, fashion centers, and freestanding retail stores.

Contributing Factors to Shopping Center Success

Location

One important factor to consider when evaluating a commercial investment property, particularly in the shopping center sector, is location. The location of any kind of shopping center can greatly impact its potential for success. It’s important to look for properties located in high-traffic areas, with easy access to public transportation and close proximity to major highways, and in a market with a strong and growing population.

Tenant Mix

Another important factor to consider is the tenant mix and the diversity of the tenant mix. A shopping center property with a mix of different types of retailers, such as a grocery store, pharmacy, and clothing store, has a better chance of success than a property with only one type of tenant. The state of the economy and buyer expendable income will directly impact some tenant types more than others.

Market Conditions and Outlook

It’s also important to thoroughly research the current market conditions and the future potential of the area. A property in an area with a strong economy and a positive outlook for future growth is more likely to be a successful investment. For example, since the COVID-19 pandemic, open-air Neighborhood Centers and Power Centers have performed consistently better than indoor shopping Malls. The contactless shopping methods were easier to implement in an outdoor layout and thus made these centers more adaptable and therefore more profitable.  

Lastly, when investing in retail properties, it’s essential to work with a team of commercial real estate professionals who have the experience and expertise to guide you through the process. Sands Investment Group has an expert retail-focused team that can provide valuable advice and guide you to make good investment decisions. Contact Sands Investment Group to learn more.

The property class system categorizes commercial real estate properties making it easier for investors to evaluate the value and risk involved in an investment. Firms and investors use a combination of various factors to determine the class of each property.

Commercial Real Estate Property Class Types

Commercial real estate property classes are meant to function as comparative indicators that help investors identify various business properties within the same market or area. Because commercial properties vary in quality, location and age they can be classified into three main groups: Class A, B, and C.

Factors that Determine Property Class

Investors normally consider these relative metrics for the purpose of comparison with other buildings in the same market or region. Excelling in one category won’t necessarily cause a property to rank in Class A– it is instead a combination of all factors. The determination of a property’s classification is a combination of some or all of these factors. These criteria normally include:

1. Risk & Return
2. Features and Amenities
3. Quality and Condition
4. Location and Accessibility
5. Growth Potential
6. Age
7. Market Perception

The three main property classes present a different level of risk or opportunity for an investor and how it may impact their investment portfolio. As buildings get updates or become dated, they can shift classes. An ideal location will always add value, while a less favorable location may prevent a nice building from being considered Class A.

What’s the Difference Between Each Commercial Property Class?

Class A is the best quality with the least risk, while Class B and C fall below in descending order. The range from premium amenities and quality location to outdated and unfavorable markets creates a grading system to help classify commercial real estate property.

Property Class A

Class A properties are the most prestigious of the three classification types. They are typically new buildings located in central business districts. They are therefore found in heavily populated areas with access to public transportation which makes them more desirable to both an investor and tenant. Due to these premium qualities, rents frequently exceed the market average.

Property Class B

Class B properties are functional, sometimes outdated, buildings that provide average market rents. They are older than Class A buildings, which implies that the investment opportunity presents a higher risk. Class B buildings are not in prime locations but are still in well-populated markets. They typically have average finishes, good quality, and minimal amenities.

Property Class C

Class C properties are the lowest quality classification and are often in disrepair. These commercial properties are typically older than 20 years, in unfavorable areas, and provide below-average rents. They often require more significant capital investment in order to maintain and repair.

Investing in Different Commercial Property Classes

Since there are different risks and rewards associated with each classification, it is important for investors to understand the details of investing in each kind of property. Class A properties provide the most security and capital preservation to investors since they have little to no outstanding issues that could result in further capital investment. Class B and C properties, however, tend to be bought at higher cap rates than Class A properties. For the additional risk that investors take on by investing in a lower-class property, more reward can be earned through the potential growth appreciation of these properties.

Sands Investment Group can help you find the best opportunity for your portfolio in any property class. We are a leading commercial real estate brokerage firm specializing in purchasing and selling investment properties. We provide services to private investors and institutions in the U.S., offering different sub-product type specializations. Contact us today or visit our website to get started.

Convenience Store Outlook

The convenience store industry has withstood fierce competition over the last few years for those looking for convenience and accessibility, and a variety of fresh and healthy products.

Industry revenue is anticipated to grow due to efficiencies in technology, higher income levels, and increase in foot traffic in populated areas. Predicted growth shows the industry rising at an annualized rate of 1.1% to $39B by 2027.

Major Products & Services

Industry operators have increasingly shifted product mixes to include food service products that are more profitable than items such as cigarettes and have focused more on satisfying demand for quick and easy meal options. As a result, industry operators have benefited from consumers’ need for time-efficient and healthy food service locations. The industry’s major products and services are:

• Tobacco products
• Food service
• Packaged beverages
• Candy and snacks
• Beer
• Other

Convenience Store Key External Factors

The industry has grown in popularity over the last 5 years as employment rates have increased. In response to Americans’ growing demand for convenience, industry operators have opened additional stores, expanded into new markets and readily adapted to changing consumer tastes to increase sales. It’s always important to research your market and keep an eye on some of the industries key external factors:

1. Healthy Eating Index: Expected to continue to rise as consumers demand a variety of premium and organic products which increases industry revenue.
2. Percentage of Smokers: While the percentage of smokers is expected to decrease, smokeless tobacco use increases leaving an opportunity in the market.
3. Urban Population: Anticipated to increase, the urban population tends to purchase more frequently, lifting industry revenue.
4. Per Capita Disposable Income: Convenience stores typically charge higher prices for non-essential items in return for accessibility. Per capita disposable income will directly affect the industry.

Owner-Operator Steps to Success

Opening a convenience store, as compared to other commercial properties, allows for freedom to determine profit margin, a natural customer segment, economic stability, and relative ease in getting starting requirements completed. However, opening a convenience store involves more than just registering it with the state. Here’s some tips on how to get started.

1. Create A Comprehensive Business Plan
   This includes researching the costs involved, such as rent or mortgage payments, equipment and inventory costs, and staffing expenses. It is also important to consider ongoing expenses, like utilities, marketing, and insurance. Additionally, you should consider the location when looking for commercial property. Be it a rural neighborhood, a rural transient area, an urban neighborhood, or an urban transient area. You should take your target market into consideration and how you can cater to their needs and preferences. Furthermore, it is crucial to think about pricing strategies and ways to increase profitability.
2. Establish A Legal Entity
   This can be a sole proprietorship, partnership, limited liability company (LLC), or corporation. Setting up a legal entity provides protection against personal liability in case your convenience store is sued. You can form an LLC on your own and only pay minimal state LLC costs, or you can hire one of the best LLC services for a small additional fee.
3. Register For Taxes
   Before you can establish your convenience store, you must register for state and federal taxes. This includes completing an EIN application on the IRS website. The EIN, Employee Identification Number, is assigned by the IRS used to identify your business and your tax account.
4. Open A Dedicated Business Bank Account And Business Credit Card
   This is essential for personal asset protection. It is also crucial to set up business accounting and keep accurate and detailed records of all expenses and income. This will help you understand the financial performance of your business and simplify your annual tax filing.
5. Obtain The Necessary Permits And Licenses
   You risk paying expensive penalties or possibly having your store shut down if you don’t obtain the required licenses and permits. This includes a tobacco vendor’s license, which must be renewed annually, a liquor license, and a lottery retailer’s license. You could also acquire a resale certificate, which enables businesses to buy products with the intention of reselling them, without having to pay sales tax. If you sell food, you will need licensing from a local health department. It is also essential to acquire music licensing and a certificate of occupancy.
6. Get Business Insurance
   Business insurance is crucial to protect your business in case of a loss. There are several types of insurance policies created for different types of businesses that face different risks. If you are uncertain about the types of risks that your business may encounter, begin with general liability insurance. Since small businesses typically require this kind of coverage, it’s an ideal place to start.

Conclusion

Starting a convenience store as a commercial real estate investment operator can be a consuming task, but with proper planning and execution, it can be a profitable and successful venture. There are also many options and opportunities to invest in a convenience store without getting your hands dirty. Sands Investment Group has a specialized team built across the country with expertise in convenience store commercial real estate investments. Check out our c-store team, convenience store listings, and learn more by reaching out to a SIG team members today.

The 2023 outlook suggests that there may be challenges ahead for the commercial real estate industry, but this kind of news is nothing new. The future of retail and office space is uncertain, and supply chain issues and high inflation persist. However, there are also bright spots in the forecast, such as the continued success of multifamily properties and the growing demand for industrial commercial real estate.

Major Influencing Factors on Industrial Commercial Real Estate

Macroeconomics

Macroeconomic factors include geopolitical issues, high inflation, and rising interest rates, which may impact commercial real estate in 2023. Inflation in the U.S. reached a 40-year high of 7.75% in October 2022, and interest rates are expected to continue to increase, which could negatively impact commercial real estate owners. Geopolitical issues such as the war in Ukraine and resulting sanctions have had major global economic implications such as supply chain issues driving up the cost of food, shelter and energy. These factors may lead to a mild to moderate recession in 2023.

Supply and Demand

Supply in the industrial sector will affect demand. According to Cushman & Wakefield, a record 148.2 million square feet of space was developed and made available by logistics developers in the third quarter of 2021. That figure is around 72% more than the quarterly average of the last five years. This record number of new warehouse supplies entering the market and growing recession worries limit demand. 

Growth in E-Commerce

The e-commerce warehouse industry has an extremely hopeful future. The retail scene has changed significantly over the past several years as a result of the COVID pandemic and the continuous digitalization of modern life, making e-commerce a crucial component of the worldwide retail business.  In fact, global retail e-commerce is expected to rise to $7.14 trillion by 2025 from $3.23 trillion in 2019, according to eMarketer. This is expected to boost the market share from 13.9% to 22.3% during the predicted period, creating a lot of room for growth and making it a promising sector for an industrial commercial real estate investment. 

Investment Strategies to Consider

In light of the potential for a recession in 2023, it’s important for commercial real estate professionals to be strategic in how they approach their business. Some strategies we think would be wise to consider:

1. Diversify your portfolio: In a recession, asset classes will be affected differently. By diversifying your portfolio, you can minimize the impact of a downturn in one particular market therefore mitigating risk and/or losses. 
2. Focus on multifamily properties: Multifamily properties have been performing well and are likely to continue to do so even in a recession. Investing in or owning multifamily properties could provide a stable source of income during a recession.
3. Develop affordable housing: Demand for affordable and workforce housing far outweighs the supply. This is an opportunity for commercial investment companies to invest in the development of this type of housing, which is likely to be in high demand even in a recession. This could include modular construction, adaptive reuse of buildings, mixed-income properties, and unique capital solutions.
4. Be strategic with financing: During a recession, credit may be tighter and it may be more difficult to secure financing. Be strategic in how you use your financing and consider alternative sources of funding such as private equity or crowdfunding.
5. Be flexible: In a recession, the market may change rapidly. Be prepared to adjust your strategy as needed to adapt to the changing market conditions. For example, if the office market is struggling, consider repurposing the space for industrial commercial real estate or multifamily use.
6. Have a strong risk management strategy: A recession can bring unpredictable challenges to your business, it’s important to have a strong risk management strategy in place to mitigate potential losses. This can include things like hedging against currency fluctuations, insuring against property damage or loss, and creating contingency plans for potential market downturns. 

Conclusion

Investors need to stay updated on what’s happening in the industrial commercial real estate market before investing their money. Sands Investment Group has a team of dedicated professionals, ready to maximize your investment portfolio. Contact our advisors to learn more today.

Interested in buying or selling a Drugstore? When the goal is growing an investment portfolio with specific properties, you can’t trust a typical real estate agency to walk you through the process. SIG is a commercial real estate brokerage firm with a wealth of experience helping clients find, secure, and purchase properties to round out their investment portfolio. Check out our newest drugstore listings to hit the market.

Last week at America’s Lodging Investment Summit in both private meetings and on the main stage experts were optimistic and even bullish, referring to hotels as “the golden child” of commercial real estate asset classes. The forecast for hotel investments in the near future looks promising as the economy stabilizes and people are eager to travel. The industry is expected to continue to present opportunities for investors interested in hospitality commercial real estate buildings. 

Key Reasons to Add Hotels to Investment Portfolio

• Opportunities for Quality Investment: The hospitality industry offers some of the best opportunities to invest in real estate, as it allows investors to diversify their portfolios. In fact, hotels are among the best commercial properties to invest in, especially because of the hopeful prediction for the industry in 2023.
• High Return: The high yield return that comes with this kind of real estate investment is the main factor that attracts most hotel investors. The revenue generated from investing in hotels is primarily realized from the operating cash flow. Therefore, it’s crucial to have a skilled management team in place to help balance hospitality-associated risks. Successfully handling these risks, however, allows for even higher returns on investments.
• Tax Efficiency: Another important advantage of investing in hotels is the tax benefits. Investing in commercial real estate is one of the most tax-efficient methods of investment. Investing in hospitality properties combines the core benefits of investing in real estate into a centralized property. Investing in hotels can reduce your tax liability, stemming from equity expansion, depreciation, and tax-deferred exchanges in commercial real estate.
• Community Impact and Brand Awareness:  To run a hotel effectively, a lot of hands have to be hired, as labor consists of almost half of the running costs of a hotel. A majority of the employees would mostly likely come from the local neighborhood, creating a significant job-creating impact on the community’s economy. Being actively involved in providing steady employment and developing a community establishes a positive outlook in the public’s eyes. Any business that invests in such will not only be impacting the community, but will also create a positive brand awareness.

Common Ways to Invest in Hotels

Buying hotel property is likely the most straightforward way of investing in hotels. Hotels come in different styles, sizes, and affordability which invites flexibility to find a hotel property that meets your investment criteria. Below are the most common ways to invest in hotels.

• New Hotel Construction Projects
• Hotel Renovation
• Hotel Franchise
• Hotel Refinancing
• Hotel REITs

Are you looking for commercial property investment opportunities or need help investing in commercial real estate? Sands Investment Group is the right place to be. We are a commercial real estate brokerage firm with years of experience buying and selling investment properties. Visit our website today to learn more about our expert investment advisors and how they can help.

One of the best ways to build wealth and meet long-term financial objectives is by investing in real estate.  Sands Investment Group has the expertise to help you build an investment portfolio to meet your financial goals. The commercial real estate industry is an excellent place to invest, offering consistent solid ROI.  This step is crucial in increasing their chances of better returns and greater long-term profitability.

What is Diversification

Diversification is the process of spreading out risk across your investment portfolio. An investor can acquire accounts in several asset classes to balance the risk of a complete loss. If one investment does poorly, diversification provides an opportunity for the investor to have other profitable assets to draw on.

4 Ways to Diversify Your Investment Portfolio

Like every type of investment, several methods exist for diversifying investment portfolios. An easy way to diversify CRE investments is by investing in various asset types and classes. For instance, an investor can invest in a residential rental property, a real estate investment trust, and a piece of commercial real estate. Investors can also invest in Class A, B, and C commercial properties as each class has pros and cons (we discuss this in further detail in an upcoming blog post).

Benefits and risks exist for each type and class of commercial building. Diversification helps the investor balance their risk. Other ways investors can diversify their commercial real estate investments include the following:

1. Diversify through several transaction sponsors
2. Using different commercial real estate investment strategies
3. Hold Time (Including long-term and short-term investments in their portfolio)
4. Diversification through locations

5 Reasons to Diversify Your Investment Portfolio

The most common reason is to balance the risk involved in their investment. Yet, there are several reasons investors diversify their commercial real estate investment portfolio.

1. Immunity Against Stocks Fluctuations
   Investors who have money in stocks should be aware that a decline in the market values of their investments can cause a domino effect. However, commercial real estate investments are rarely affected by stock market fluctuations. When the value of their other equities declines, solid commercial real estate investments help to mitigate the effect on their portfolio.
2. Tax Benefits
   A commercial real estate investor may profit from a variety of tax advantages. Taxes on cash distributions may be sheltered or postponed by deductions for things like interest expense and depreciation. For instance, the current cash flow will mostly be lower than the total interest expense and depreciation costs, resulting in a return like a tax-free bond.
3. Hedge Against Inflation
   Fortunately for investment, commercial real estate rarely sees impacts from inflation. According to statistics, the inflation in 2008 was the only time that affected the real estate industry negatively. This is due to the consistently high demand for the commercial real estate industry. Demand will increase as long as people need these properties for their businesses. So, CRE investments offer a hedge against inflation.
4. Passive Income
   Investors can earn passive income from their commercial real estate investment without stress. They can even earn more if they work with reputable commercial real estate companies. Their property manager will handle all aspects of maintaining the property while steady income continues to flow to the investor.
5. Access to a Variety of Investment Types
   When investors diversify their portfolios, they have access to various types of properties. Each of these properties adds additional value to their portfolio while simultaneously protecting their other investments.

Do you need help diversifying your investment portfolio? Don’t hesitate to contact us at Sands Investment Group. We are a reliable commercial real estate brokerage company skilled in buying and selling investment properties. We sell properties for individuals, companies, and other institutions in the United States. Contact us today or visit our website to learn more about our services.

What is a Medical Office Building?

Often located near hospitals or on hospital campuses, medical office buildings (MOB’s) are a type of commercial real estate building that falls under the office asset class. They differ from traditional offices because of the building requirements needed to satisfy the needs of healthcare facilities with features intended specifically for use by physicians and other healthcare personnel such as waiting, exam and operating rooms. MOB’s are typically built with considerations for superior soundproofing for doctor-patient confidentiality, advanced air ventilation standards and have special requirements around parking and ADA accessibility.

3 Reasons You Should Invest In Medical Office Buildings?

Medical office buildings are seen as a lower risk commercial real estate investment for many reasons.

1. Healthcare is a fundamental human need that will not go away nor diminish. People will continue to need medical attention regardless of their financial situation. The COVID-19 pandemic has shown how resilient the industry is. This is demonstrated by the sector’s robust rental income, which has remained over 95% for the last two years. Most MOB renters were able to pay their rent on time as patients continued to seek treatment despite the economy. While elective treatments could be postponed, those who are unwell or require urgent medical care will still need to visit the hospital whether the stock market is rising or falling.
2. Forecasted increase in demand. Due to the large size of the baby boomer generation individuals over the age of 65 will increase by 73 percent between 2010 and 2030. One in five Americans will be a senior citizen. Easier access to medical care will be critical for the US’s aging population. People tend to visit the hospital more the closer they get to retirement. Senior citizens typically visit a doctor ten times more often than those of a younger age. These increased medical needs create a higher demand for more medical offices building locations specifically close to suburban areas and neighborhoods.
3. History of strong performance. If you take a look at the top 50 MOB markets in the US, transaction volume has grown from $18.2B to $24.5B in the last quarter alone, vacancy rates have fallen 40 basis points in the first half of 2022 to 8% and transaction volume has also increased by 79.2% from 2021, setting yet another record for the sector. Higher prices don’t always mean higher rents and having a trusted investment advisor who is familiar with these markets is important in order to avoid investment deals with weaker cash flows. If you know where to look, medical office properties in specific markets provide a solid tenant mix that will yield long-term value for investors.

Learn More With Sands Investment Group

If you want to invest in medical office buildings, you can trust that Sands Investment Group’s specialized Medical Office Building team will provide top notch advice. We are a commercial real estate brokerage firm specializing in purchasing and selling commercial investment properties for private investors and organizations throughout the United States. Contact us today to learn more about our services.

To understand whether cap rates are moving, one must first understand their influence on the world of commercial real estate investing. A cap rate, or capitalization rate, is considered a real estate valuation measure that plays a role in comparing different real estate investments. The cap rate calculation is the annual net operating income (NOI) ratio to the asset’s market value. This provides the rate of return for professionals to use in comparison.

Now more than ever, the importance falls on the movement of these cap rates. In a year like 2022, it can seem like nothing is certain in the world of investments. However, understanding this valuation can give you insight that benefits your financial decisions in the long term. Learn more with Sands Investment Group to get started.

What Factors Affect Cap Rate?

As in the rest of the world of investing, specific factors can influence cap rates. It comes down to three main options that can make this number change. The first of these is macro-level economics and demographics. Next, the micro-level market influences come in. Finally, the property type plays a role in changing the cap rate.

By seeing the influence of each of these factors, it is understandable that cap rates can vary by the area you are observing. However, the market as a whole maintains a similar direction depending on the macro-level economics of the country and the world.

How Can The Cap Rate Move?

The movement of cap rates depends on the factors that affect the quantities included in the ratio. The direction of cap rates is considered cyclical as they go up and down depending on how the market looks at a given time.

To see how the cap rates are currently moving, you have to look at the state of the market. Take interest rates, for example. When interest rates are low, you provide lower payments, allowing for lower monthly debt payments on a given property. The cap rate drives down by increasing the purchase price in the cap rate equation. Thus, when interest rates are low, generally so are cap rates. When interest rates are high, the cap rates usually rise as well.

Stephen Plourde of Sands Investment Group explains that buyers expect increased cap rates across multiple product types as a direct result of the finance-ability of NNN deals, precisely because of the recent and anticipated rise in interest rates.

As we look at the current market, Plourde explains that there are still 1031 exchange buyers at aggressive cap rates similar to the last 24 months; however, there is a disconnect between buyers and sellers, specifically when a buyer requires financing. “Smart sellers will sell their properties more quickly in today’s market when they recognize that the market has shifted. They must work collaboratively with their Investment Advisor to price their properties with a forward-looking approach,” says Plourde. Looking in the rear-view mirror will lead to sellers missing the buyers looking to transact in the 3rd and 4th quarters of the year.

Learn More With Sands Investment Group

Understanding cap rates is essential as you enter the world of commercial real estate investing. That is why you must work with a company with the research and data-driven expertise to back it. At Sands Investment Group, our team is ready to get you started from the beginning to help you make impactful deals. Don’t waste any time, and get started with us today! There is always more to learn as cap rates move and change.  Learn more about investing in commercial real estate with Sands Investment Group today. Call 844.SIG.NNN or find out more on our website.

 

It takes more than the desire to grow your financial portfolio to start investing in commercial real estate. The savvy investor conducts a lot of research into the most profitable types of commercial properties before making any decisions. It’s essential to know with certainty that you will be able to give your investment total commitment. 

Read more →

Are you looking for a way to achieve significantly higher real estate values? A sale-leaseback is a financing tool that allows property owners to sell their real estate assets to another buyer as they sign a long-term lease to be the tenant, securing the location in the process. Simply put, the seller of the asset becomes the lessee as the purchaser becomes the lessor.

In the current state of the market, the sale-leaseback is becoming more prevalent across industries. With the numerous benefits that come with it, this is no surprise. Sands Investment Group is here to provide you with the basics of a sale-leaseback, so you can decide whether it is the right fit for your commercial real estate investment decisions.      

Who should consider using a sale-leaseback? 

Often, the most common participants are builders or companies with high-cost fixed assets, in this case, commercial real estate. It allows these people to use the cash they invested in commercial real estate in other ways while still needing the asset to operate the business. 

Does this sound like a financing tool that could benefit you and your business as an investor? Sands Investment Group could be the resource you have been looking for to start.  

What is the process of a sale-leaseback? 

Understanding what a sale-leaseback looks like is one thing, but going through the process is another. At Sands Investment Group, we break down this process into three steps. 

1. Evaluate the Business 
2. Market Analysis 
3. Structuring a Lease

As the overarching tasks, each of these steps breaks down into extensive research tied to the characteristics of your specific case. Find the details here. 

What are the benefits of a sale-leaseback? 

The benefits of a sale-leaseback are broken down into that of the original seller and the purchaser. It creates a mutually beneficial agreement that creates opportunities for both parties to see positive impacts in their financial pursuits.  

For the original seller, one of the first benefits to consider with a sale-leaseback is that it is an alternative method of raising capital. In the instance of a loan, the company must repay the money, making it appear on their balance sheet as debt. With a sale-leaseback, the liability on the balance sheet decreases, while the current assets will increase. It does not present the same appearance of debt in the long-term overview of the business.   

Along with the benefits present on the balance sheet, sale-leasebacks give you the chance to grow your business with ease. This means you can use the capital to open other locations, expand the current company, or acquire another business or real estate property. As you grow, the volatility risks of owning the asset decrease with this method.  

On the other hand, the purchaser can expect benefits as well. From the start, they achieve ownership of a cash-flowing asset that also happens to be backed by a long-term lease. They also know that the long-term lease is tied to someone who wants to be a tenant and continue to utilize the property because of how a sale-leaseback originates. As a result, the purchaser can deduct the property’s depreciation expenses from their income taxes. 

Find the perfect sale leaseback listing for you by looking at the active inventory Sands Investment Group has to offer. 

Work With Sands Investment Group 

The sale-leaseback may be the financing tool you’ve been waiting for to expand your business. Now that you know the basics, it is time to take the next step. Sands Investment Group has experience in all types of commercial real estate to help you navigate leveraging your existing assets for more capital to fund future investments. 

At Sands Investment Group you can find highly personalized client services with an extensive network of investors to help you get started on discovering more about sale leasebacks. Call 844.4.SIG.NNN or find out more on our website.      

As the country gradually opens up, in-person events are at the forefront of people’s minds. The world of commercial real estate has long since benefitted from the presence of events such as conferences. In an industry heavily influenced by relationships, conferences give brokers, market experts, investors, and other interested parties the chance to engage with others on a topic-specific scale. No matter your area of interest, there is a conference to explore. 

We’ve had the chance to see what it is like to host events online. While that filled the necessary gaps at the time, it’s important to take advantage of the benefits that only come with an in-person conference. You can find Sands Investment Group at many conferences throughout the year, where you can schedule time with one of our advisors.  

  

Step Out From Behind the Screen 

While programs like Zoom have become the closest thing to conferences in the past few years, they are not a replacement for the impact of in-person events. Your physical presence can say a great deal about your work. If you walk into the room confident and knowledgeable, that stands out to people in a way they cannot see over a computer screen. 

Networking Possibilities 

People attend conferences when the topic matters to them, and they want to be surrounded by others who feel the same. For commercial real estate, this gives you ample networking opportunities with colleagues who have similar interests in your area of expertise. 

This brings back the well-known concept of an elevator pitch. When the most relevant information about you is demonstrated in less than 30 seconds, you can establish credibility and cause without having to make the conversation too time-consuming. Make your commercial real estate skills clear from the beginning to draw out the most productive conversation.    

Grow Your Brand

By getting your name out into the commercial real estate industry, there is room to grow your personal brand. You can effectively generate leads for your business or establish a list of people to stay in contact with. 

Building leads in person creates that connection that the internet lacks. People can connect your face and actions with your business in a way that sticks. This is the best time to have business cards, handouts, and any extra information you need ready to give out, along with a strong handshake. 

Discover New Trends and Knowledge

There is always more to learn in commercial real estate. Conferences place you in locations surrounded by those who you can teach things about your market knowledge, but also people who you can learn from. Honing your skills can enhance your work once you step out of the conference and back into the workplace. 

This new knowledge often comes from two places: people and panels. By contributing to the networking and discussion, you are sure to learn from those you talk to. On the other hand, these conferences include informational sessions from industry experts on trends and foundational information. In the past few years, these have had to occur online. However, attending a session in person gives you more of a reason to pay attention and speak up when there is something to discuss. There is no more sitting behind a computer screen with the camera turned off. 

Schedule Time With a Sands Investment Group Advisor 

Have you signed up for an upcoming commercial real estate conference? This may be the perfect time to get to know one of our Sands Investment Group advisors. Step out from behind the screen and get back in person. The networking, knowledge, and growth that accompany it will be worth it. This year alone, we have had the chance to attend Inside Self Storage World Expo, BOMA International’s Medical Office Buildings + Healthcare Real Estate Conference, Private Equity New York Forum, The Car Wash Show, ICSC Las Vegas, and NAIOP – I.CON East 2022. We look forward to attending the NACS Show, Restaurant Finance + Development Conference and many others later this year. Contact our experts today to set up a meeting by calling 844.4.SIG.NNN or sending us an email at info@SIGnnn.com.

The stock market is often the first thing that comes to peoples’ minds when they hear “investment.” However, it has become more and more worthwhile to take those same dollars and move them into real estate investing. With the proper guidance and considerations, the choice to invest in the real estate industry can bring returns that the stock market does not have.

At Sands Investment Group, we understand the benefits of investing in the commercial real estate industry. Our goal is to make others see it as well. These advantages can steer you towards new ways to grow your portfolio over time, from practical tax advantages to long-term security.

Real Estate vs. the Stock Market

Understanding how investing in commercial real estate differs from the stock market is more straightforward when comparing the two categories. Real estate is not as liquid as stocks, requiring more time, but the results often outweigh the disadvantage of time lost. 

When investing in the stock market, you buy a small piece of a company. This allows you to make money in two ways: value appreciation and dividends. On the other hand, real estate requires acquiring physical land or property. Here, the returns stem from collecting rent and property appreciation. The choice of what to invest in is personal and requires analyzing your financial situation, risk tolerance, and goals.

Practical Tax Advantages

The choice to invest in the commercial real estate industry comes with practical tax advantages. There are multiple instances of deducting expenses tied to owning an investment property. This includes mortgage interest, property taxes, management fees, insurance, ongoing maintenance costs, repair costs, and money spent finding potential renters.

From there, selling the property for more than you bought it results in taxing the income as capital gains, which usually entails lower tax rates.

Commercial real estate investors also have the chance to participate in 1031 exchanges that allow them to move from one property to another, providing tax benefits along the way. Learn more about this opportunity here.

Passive Income

There are few day-to-day requirements when investing in the real estate industry while still generating income. Consider this: in multi-family or residential properties, the revenue stems from rent. The tenant pays this, and the result is income for you. There is minimal action required to ensure that money comes in. On the other hand, the stock market requires more patience in seeing the result of the choices you are making at the moment.

Diversification of Your Portfolio

In recent years, we have seen why diversification of your portfolio can be advantageous. When economic turmoil occurs, having your investments in multiple locations can even out potential loss in other areas. If the stock market is struggling, your commercial real estate investments can still see success. It gives you another method of growth that does not require you to rely entirely on stock market investments.

Long-Term Security

If there is something that everyone is looking for in their financial decisions, it is long-term security. When investing in commercial real estate, you know that the time commitment is more significant than options such as the stock market. Over several years of owning the property, you can wait to see it appreciate. Along with that, you have the potential monthly rental revenue coming in.

With 10 to 25 year options, NNN leases are a great way for investors to find a reliable, long-term opportunity. Here, the business takes on the role of occupying the space for years. Due to this, landlords do not have to worry about finding new tenants to take on the space.

Feeling of Control

The physicality of commercial real estate investments gives buyers a feeling of control. You are the technical “CEO” of your investment in the role. This gives you the ability to cut costs, make improvements, choose tenants, change the rent, and decide on the best market opportunities. This lack of dependence on a larger entity, such as the stock market, can provide peace of mind knowing you can make changes when you want to.

Consider Commercial Real Estate Investing With Sands Investment Group

The stock market does not have to be your only option in investing. While it is considered a more hands-on investment, the commercial real estate industry gives you the returns you’re looking for. As we have continued to observe, it is valuable to find an option that provides peace of mind and a feeling of security in a tumultuous economy. Are you looking to place your finances somewhere other than the stock market? Sands Investment Group is the perfect place to start your commercial real estate investment journey. Contact our experts today by calling 844.4.SIG.NNN or sending us an email at info@SIGnnn.com.

The world of commercial real estate has multiple facets of information. Investors, buyers, sellers, and anyone in between juggling plenty of important terminology, from the types of properties to how they are purchased. It is easy not to know where to start. 

This beginner’s guide to commercial real estate terms gives you a kickstart towards your goals. By breaking down the content into understandable sections and ideas, you can focus on what applies most to you—looking to take this new knowledge even further? Sands Investment Group is here to get you started. 

Understanding Commercial Real Estate Terms 

Categories of Commercial Real Estate 

Multifamily 

Multifamily is often considered the crossover between residential and commercial real estate. This means that someone can use the property residentially, but the property’s primary purpose is an investment opportunity. This is something such as a duplex or multi-unit apartment building. You can find out more by looking into the multifamily listings we have to offer.    

Office Space

Office spaces are typically broken up into urban or suburban. Urban office buildings are found in cities, often a part of skyscrapers and high-rise buildings. Suburban offices generally are smaller in size and often grouped in office parks. There are so many office listings to choose from, especially from the current collection of office listings we have at Sands Investment Group. 

Retail 

Retail spaces typically house retailers and restaurants. They can be single-use buildings that stand alone or multi-tenant. Often these are described as shopping centers as well. Shopping centers vary by size, concept, type, number of tenants, and trade area. If you are looking into investing in a retail space, there are many to choose from in our collection of retail listings.   

Industrial 

There are four main types of industrial-centered commercial real estate: heavy manufacturing, light assembly, flex warehouse, and bulk warehouse. They often vary heavily in size, depending on the specific use-cases. With many options to choose from, it is important to find the best fit for you. Sands Investment Group can help you make that call with our current collection of industrial listings. 

Hospitality  

Hospitality can also be referred to as hotels. These properties are described as full service, limited service, or extended stay locations.  

Commercial Real Estate Investing 

Land Banking  

Land banking refers to acquiring land, leaving their cash in a tangible, fixed asset rather than a savings account or the stock market. There are no extra payments of utilities, tenant issues, mortgage payments, or anything else that could impact a property.  

Fix and Flip 

With fix and flip, an investor purchases a property, renovates it, and then sells it for a profit. This is typically done at a discount because of its condition.   

Wholesaling 

Wholesaling is considered a strategy that includes a wholesaler entering in on a contract for a property before then selling it to a new buyer on behalf of the owner. This type of contract means that the wholesaler did not purchase the property, but they have the right to sell it for the owner.  

BRRRR  

BRRRR stands for “Buy, Rehab, Rent, Refinance, and Repeat.” This is a standard method of investment that contains more steps but brings forth a profitable result. 

Passive Investing  

Using passive investing, you can minimize buying and selling and maximize returns. This tracks a market-weighted index or portfolio. While it is most common in the equity market, it is more used in other investment spaces, such as commercial real estate. 

Location Considerations

Zoning  

Commercial zoning laws create regulations for different buildings. This often controls the type of activities a business can participate in, depending on the area. It also notifies what categories of business can occupy a zoned area. This can also factor into the features of the building as well in ways such as its setback.

Building Classification

There are three metropolitan base definitions for building classes. 

Class A 

Class A is deemed the most prestigious of buildings that have rents that are higher when compared to places in the proximity. They are considered state-of-the-art, accessible, and have a strong presence in the market.  

Class B

Class B is where most of the users can encounter average rent for the area. The finishes are not typically as well-done as Class A, but they are considered suitable for the site. These do not compete well when priced similarly to a Class A option.   

Class C

Class C classifications are properties with function space to rent below the area’s average cost.  

Request For Proposal 

As you determine what you need and want in a space, sharing that with a commercial real estate broker is an essential first step. You can submit these specifications in the “request for proposal” document as you find properties that meet your criteria. This document gives landlords information about what you are looking for to begin negotiations.  

Right of First Refusal 

This clause is advantageous for commercial buildings that receive a lot of attention. It requires a landlord to offer you additional space to lease before making it available to the general public. While you are offered this space first, you can refuse without implication.   

Rentable Square Footage   

Rentable square footage is the amount of usable square feet in a space, including a portion of the shared space. That common space is defined as the space that every tenant has access to and can use. 

Usable Square Footage 

Compared to rentable square footage, the usable square footage is the total area unique to the tenant. This does not include the shared common space that all tenants can use. 

Parking Ratio 

The parking ratio is the number of parking spaces in the property’s lot reserved for a company’s employees. This can be found by dividing your space’s total rentable square footage by the number of parking spaces.  

Option To Purchase

This part of a lease is the place of providing information to a company about how they can potentially purchase a space they are leasing. This is most commonly seen in whole-building leases with a single-tenant being responsible for the property. 

Sublease Clause

While not every landlord chooses to incorporate this clause, tenants need to reference it to see whether or not they can sublease the space to another business or individual. The tenant can consider renting out the space to someone else for some or all of the remainder of the lease when it is allowed.  

Estimating Value 

Cap Rate   

Capitalization rates are estimates used to compare the rates of return on commercial real estate properties. This number is found by dividing the property’s net operating income from its property asset value.    

Cost Approach

Cost approach is one of the methods used in real estate valuation. It estimates the price that a buyer should pay for a property as equal to the cost to build an equivalent building. 

Market Approach

The market approach determines the value of an asset by observing the value of other similar assets. This comparison can help decide what to price the asset at that fits fairly into the rest of the market.   

Income Capitalization Approach 

The income capitalization approach is a type of real estate appraisal that allows investors to use the property’s generated income to estimate its value.  

Gross Rent Multiplier (GRM) 

The gross rent multiplier (GRM) takes the property’s purchase price divided by the annual gross rents. This equation takes the numbers into account before considering property taxes, insurance, and utilities.  

Learn More With Sands Investment Group 

This beginner’s guide is just the start to learning the ropes of commercial real estate. Putting these terms into action can provide investment opportunities and a growing financial plan. Do you want to know more about the commercial real estate industry? Sands Investment Group is here to provide you with the resources and the knowledge you need. Talk to one of our advisors today to get started on your investment journey.