In a climate of economic uncertainty, many feel apprehensive about their investments in 2023. Specifically, the middle class is deeply worried about their wealth-building options and the future of the nation. This apprehension is understandable, but many don’t realize that now is the perfect time to invest wisely for greater future returns.
It’s far from easy to confidently invest your hard-earned money, especially during uncertain times. However, there are some kinds of investments that can actually protect you from the risks of inflation. That’s why many investors are turning to local commercial real estate.
Commercial real estate has historically been a safe haven for investments, even if their values do drop over the course of a recession. According to Assetmonk, real estate has outperformed other assets during prior financial crises, leading some investment experts to refer to it as a “recession-proof” investment.
Here are four kinds of commercial properties that will be smart to invest in during 2023 (and that will withstand potential recessions).
1. Warehouses
In 2022, the industrial sector remained one of the strongest commercial real estate performers, despite rising interest rates, increasing global trade tensions, and severe economic storms. Our prediction is that they will continue to perform as well in 2023.
The demand for warehouses is on the rise due to the growing e-commerce sector, and it doesn’t look like it will decrease anytime soon. Unlike some other property investments, warehouse demand isn’t seasonal – its use is constant, making it a solid investment if you have the capital.
Savvy investors place their money in sectors that are expected to perform well in the long run. Industrial warehouse properties are viewed as a good option because they usually offer a healthy return on investment.
If you ask most investors, they consider a “good” annual ROI to be 7% or higher. Most warehouse property investments generate 8% to 10% returns yearly, leading them to be considered very solid investment opportunities.
With many companies reporting a shortage of warehouse space, now is a good time to invest in warehouses. As the economy works its way back, more entrepreneurs are starting to build and store their products locally. This trend will only increase demand for warehouses, which is great for those looking into recession-proof commercial property investments.
2. Office Complexes
Many investors were worried about renting office complexes in the wake of the work-from-home and hybrid workplace wave, but there’s still a big need for office spaces.
Despite the rise of online work and working remotely, there will always remain a need for office spaces. In fact, return-to-office rates are expected to rise in 2023 as many businesses finally tire of or outgrow remote work setups.
The biggest reason to invest in commercial office complexes is the high-pay potential they bring to the table. Commercial office complexes offer an array of possibilities for investors, and they have proven to be valuable commodities in years past.
Due to the high rate of office space vacancies we’ve seen in 2022, many investors are steering clear of this space, but that can open opportunities for those willing to take the risk. Certain regions around the country (such as the Minneapolis and St. Paul region) are showing a bright future for office complexes – so get in before the competition does.
3. Apartment Buildings
Investing in apartment complexes is an excellent way to diversify your portfolio and protect yourself against a recession. You can earn money quickly after acquiring an apartment building and gain a substantial amount of long-term equity.
Everyone needs a place to live, and with an ever-growing population, there will always be a demand for residential rental properties. During a recession and with high-interest rates, fewer people are going to be looking to purchase their own homes. This will increase the demand and the renewal of leases at apartment complexes and multi-family residential buildings.
Investors can build wealth as they increase equity in real estate investments. Owning a multifamily apartment complex presents an excellent opportunity to quickly increase your equity in a property.
You can increase rents and reduce expenses as needed in order to force appreciation and, ultimately, increase the profits of the property. By adding amenities, services, and utilities to a property, a landlord can justify raising the rent to force appreciation. An expense audit can also increase profit margins by identifying unnecessary areas of expenditure.
4. Self-Storage Units
Local commercial real estate investing can sometimes be a lot of work, but there are certain types of real estate investments that demand minimal attention and administration. This brings us to our fourth kind of property to purchase in 2023: self-storage units.
Self-storage properties are one of the easiest real estate investments because they require minimal staffing and management, yet they have a massive return on investment potential.
Self-storage units provide consistent revenue, either monthly or yearly, which means a steady cash flow for investors. They’re also an easily scalable investment avenue, as you can build up existing properties or acquire new locations.
Many top investment advisors claim the self-storage market is nearly recession-proof. In part, what makes self-storage so strong, is that it isn’t a trend – it’s something that consumers will need whether a recession occurs or not.
We’re Here to Help You Make Recession-Proof Investments
We know it’s not easy to put your money into unsure investments during these times – but there are some real estate investment strategies that can prove profitable, even in a bad economy.
Identifying which commercial properties are right for you and when to acquire them are the first steps toward building a recession-proof portfolio. There are plenty of avenues for strong investing through economic downturns, but some are more resistant to a bad economy than others. Investing in quality buildings that will weather the toughest of economic storms will put you in the perfect position for long-term success.
Gonyea Commercial Properties has a comprehensive knowledge of commercial real estate trends in the St. Paul/Minneapolis area. We understand the latest real estate trends and will help investors navigate the Twin Cities commercial real estate market.
We’re committed to providing the best professional commercial real estate investment services. Contact us today to learn more about real estate investing during a recession.
