Real estate investing in 2022 has proved to be an unpredictable endeavor. In the wake of COVID-19, record-high inflation rates, and an uncertain economic landscape, navigating the real estate market and turning investments into profits has been anything but an exact science.
Even through an unpredictable year, active investors have seen plenty of solid real estate investment opportunities. As we enter 2023, we’re taking a look at some of the top lessons we’ve learned this past year – and using them to create even more real estate investment opportunities in the year ahead.
Whether you’re an experienced real estate investor or you’re just learning how to get into property investments, you can take advantage of these five real estate lessons we learned in 2022.
1. Commercial Real Estate Still Pays Off
Property ownership is one of the best long-term investments – and that includes commercial real estate (CRE). In 2022, we saw CRE investments produce consistent returns, passive income for investors, and strong growth potential.
In fact, commercial real estate is quickly becoming a more popular alternative investment to residential real estate. This is especially true for multifamily properties, as well as industrial, retail, and office spaces.
Currently, industrial is the top-performing CRE asset class, while retail space is the lowest performing sector. This is largely due to the sharp increase in online shopping during and after the COVID-19 pandemic.
As many investors looked for low-risk properties to purchase during 2022, they turned to properties that had multiple tenants at a time, such as large warehouses or apartment complexes. The bottom line is that buying real estate in 2022 is still profitable – but some commercial sectors are more so than others.
2. Real Estate Investment Opportunities Have Evolved
As the market has changed and evolved, so too have real estate investment opportunities. Most investors have realized that there are other ways to make money besides actively buying and selling properties.
A rising trend we’ve seen in 2022 that we expect to continue in 2023 is passive real estate investing. A passive real estate investment doesn’t require substantial effort or know-how from the investor.
There are several ways to generate passive income through real estate investing. These include:
- real estate funds
- real estate investment trusts (REITs)
- crowdfunding opportunities,
With these types of passive real estate investing, investors can earn additional income without doing any physical work or directly managing properties.
Whether it’s buying and leasing commercial properties or investing in REITs, the landscape of real estate investment is evolving. This is great news for real estate investors, as they will have more opportunities to make money through all kinds of activity.
3. Office Space Demand Is Recovering
Although the demand for residential real estate was extremely high from 2020 through 2022, commercial real estate didn’t see the same boom. Some real estate experts even predicted the “apocalypse” of commercial real estate, citing 39% declines in office values.
However – commercial real estate is showing some recovery, despite the increasing switch to remote or hybride workspaces. According to JLL’s Office Market Outlook Report, gross leasing activity increased by a modest 0.1%. Many tenants put expansion plans onhold in 2022, but as a record-high number of leases expire at the end of the year, we’ll could see an increase in commercial leasing activity.
4. Property Values Are Still Rising
Despite the pessimistic outlook on commercial property, especially office complexes, we learned that property rates were still rising throughout the last year. According to RCA’s commercial property price index, prices have increased 18.6% year-over-year.
If investors have learned anything in 2022, it’s that property prices won’t be suddenly plummetting anytime soon. Despite the market’s volatility and many property owners’ fears, U.S. commercial properties have hovered just below record-high rates in the industrial and apartment sectors.
5. You Can’t Ignore Online Real Estate Activity
In light of the changing landscape and the COVID-19 pandemic, online real estate services are booming.
Digital tools such as Zillow, Realtor.com, and Trulia are impacting how real estate sales are made across the nation. The internet offers a place for buyers, sellers, agents, and investors to connect, conduct business, and bypass the traditional way of doing things. In other words, online real estate activity is changing the game.
One big trend we saw with buying real estate in 2022 was the rise of iBuying.
An iBuyer is a company that purchases homes with outright cash offers. iBuyers purchase homes in as-is condition to quickly turn around and sell with minimal repairs. This process is appealing to sellers as it saves them time and effort, and avoids realtor fees. For the iBuyers, the profits can be significant.
Virtual real estate agents also present a valuable resource for both commercial and residential property investors. The ability to discover, view, and research properties in markets both near and far is invaluable when it comes to real estate investing. Deals can even be closed over the phone or computer, making fully-remote deals possible.
In 2023, we expect to see an ongoing shift in the way real estate transactions are done. More deals will be done without the hassle of visiting multiple properties and filling out paperwork in person.
How We Help Investors Like You
Buying real estate in 2022 has proved to be vastly different than it was pre-pandemic, and we expect to see new opportunities for investors in 2023 that haven’t been available before. A ready investor is one who learns from past real estate lessons and applies what they learned through new challenges as they present themselves.
Gonyea Commercial Properties partners with investors to help find, buy, and sell commercial properties. We also help manage their current portfolios as well as provide guidance on new opportunities that may arise. Even with the ever-rising property values in the Minneapolis/St. Paul metro area, there are countless great opportunities for commercial real estate investments and sales.
We keep a close eye on the national and local trends and are ready to help you make your next move in commercial real estate! Contact us today to learn more about how we can help you achieve your investment goals.