For commercial real estate investors, there are several areas of the United States that are fast growing in the real estate market that have the potential to yield high-profits. To determine where these locations are, a real estate investor needs to consider several factors that would make the area attractive. These include a low unemployment rate, low purchase prices, high tenant demand, low vacancy rates, and high asking rents. When a city is moving forward with these factors, a commercial real estate investor’s interest is piqued.
Low Unemployment Rate
When the unemployment rate of the area’s residents are lower than the national average or are showing signs of lowering, it often signifies a trend of an increase in workers, meaning more commercial real estate may be needed.
Low purchase prices
When the purchase price of commercial properties are low, and the other factors listed exist in the area, it may be a good idea to buy that property. Properties that are listed below market value where the workforce is growing means you could be seeing a return on your investment quickly.
High Tenant demand
When cities are building new residential structures and they are being filled quickly, it’s a sign that the area is growing, and fast. As more people move into the area, the need for commercial real estate naturally increases.
Low vacancy rates/high rent
Just as more people are moving into new apartment buildings, if the demand for these buildings increase, the rent will also go up. If you’re able to invest in a commercial real estate building in an up and coming market where many people are moving to, you’ll be able to charge more for rent that keeps the vacancy rates down.
Examples of these markets
San Francisco’s office spaces are one of the most expensive in the country, and those who own the commercial real estate offices and retail spaces are able to charge the most per square foot. This city also has one of the lowest unemployment rates in the country.
Austin has the lowest unemployment rate in the country and the state of Texas has had one of the lowest unemployment rates in the past forty years. As more jobs continue to roll into the area, commercial real estate investors will be able to charge more for the retail and commercial spaces they own.