As the economy grows and continues to stabilize, the commercial real estate market will continue to reap the benefits.
According to Tim Bratz, owner and CEO of CLE Turnkey Real Estate in Lakewood, and David Leb, sales associate at Cushman & Wakefield | CRESCO Real Estate in Independence, commercial real estate ends up on top due to its relationship to other aspects of the real estate and finance markets.
“Interest rates play a big part,” Bratz said. “The lower the rate, the lower the monthly payment. You can buy more property. The lower the rate is, the more they can pay. That is a big contributing factor. Also, the economy is growing with low unemployment.”
Leb attributed the rise of commercial real estate to the subsequent rise of residential real estate.
“A lot of the new developments are actually residentially pushed, they are influenced by the residential demand,” he said. “The new office spaces like Pinecrest and Van Aken, they have significant commercial spaces but are largely residentially driven. For downtown, there is a real push for millennials that want to be downtown and have that urban environment but also be surrounded by those amenities for the work/play/live mentality.”
Another reason commercial real estate is on the up and up is because it’s an investment people can trust, said Bratz.
“Especially with commercial real estate, people are looking to put their money into something sticky,” he said. “Obviously, there was a bit of a bitcoin and cryptocurrency boon and people now realize it isn’t a real investment. They want something predictable and real estate is time-tested. It is not speculative and it continuously grows in value. When you buy an investment property, you know the return it will yield before you buy it.”
Leb mirrored this idea, commenting that commercial real estate is growing due to the stabilizing economy.
“Coming out of the recession, people were nervous and the banks weren’t lending,” he said. “The economy has been growing at a good pace without signs of a slowdown. Things are feeling optimistic and interest rates are low. Money is a little easier to come by now than it was five to 10 years ago.”
Though commercial real estate isn’t difficult to invest in, Bratz said inexperienced individuals would benefit from partnering with a seasoned investor.
“I buy a lot of my properties from two types of people, one is mom and pop owner operators that want to dump their property as quick as possible, but others are smart entrepreneurs that think they can get involved in real estate because they see it,” he said. “There is a learning curve whenever you start a new business. So, they thought since they had success in stocks, they could do real estate too. So, for someone getting started, seek out someone who knows what they are doing and joint venture with them.”
Keeping that in mind, Leb noted the Cleveland market is seeing new names.
“For a long time, it has been the same local players here,” he said. “When you’re seeing bigger companies like Forest City exiting the market, newer brands have the opportunity to enter. These companies are adding more and more to their portfolios and it’s about knowing the market. Cleveland is a small town really, it isn’t that big. To be effective here, you need to know the right people to get anything done.”