New research has shown that Orange County, CA, is currently the best place to buy office property. Specifically, the commercial real estate market in San Juan Capistrano is booming faster than anywhere else. This has made the city, and Orange County as a whole, very attractive for those interested in investing in commercial real estate.
Commercial Real Estate Investment Trusts (REITs)
Investing in commercial real estate requires a huge amount of capital, more than the average individual is able to afford. In fact, this is one of the reasons why commercial real estate is often purchased by businesses directly, and why so few individuals see it as a viable form of investment. However, they could choose to invest in a commercial real estate investment trusts (REITs) instead.
Real estate investment trusts – Reits – offer an alternative, allowing investors the opportunity to gain exposure to the kinds of real estate that would otherwise be too expensive.
Essentially, a REIT allows a group of individuals – and businesses – to pool their money together. As such, they never fully own a piece of commercial real estate, or other forms of real estate, but share ownership instead. Once the property is sold, the profits are also shared among the different investors. Some REITs have also started to become property managers, which means investors share the proceeds of the monthly lease revenue, without having the responsibility of being a landlord for a property.
Orange County commercial real estate is currently being snapped up by REITs, and for good reason. The market is booming, particularly in terms of office space, with many new properties being developed. Interestingly, this is a trend seen in other parts of the country as well.
Office Property Investments
The latest piece of research was completed by Ten-X, which found that, overall, there is a stall in the office sector market.
Ten-X, the nation’s leading online real estate marketplace, today released its latest U.S. Office Market Outlook, including the top five ‘Buy’ and ‘Sell’ markets for office real estate assets. The long-term forecast reveals that the sector’s fundamentals appear to be stalling after years of slow recovery, as vacancy rates have plateaued despite a healthy labor market and growing national economy.
However, there were notable exceptions on this forecast, one of which was Orange County, with San Juan Capistrano, in particular. Other areas where the market continues to boom include Miami, FL; Palm Beach, FL; Oakland, CA; and Portland, OR. These are the areas where growth continues to be significant, and where the time is therefore right to strike a good deal. According to Ten-X, the West Coast and Florida are areas where the economy is seeing almost unprecedented growth. There is consistent job growth, and demographics that enable these jobs to be filled. As a result, demand for office space is increasing exponentially.
However, Orange County and the other aforementioned areas are quite unique in that when compared to the rest of the nation. The worst places to invest at present, and where the recommendation is, in fact, to sell, include Milwaukee, WI; Memphis, TN; Maryland as a whole; Cleveland, OH; and Houston, TX. In those areas, the labor market is weakening rapidly. As a result, there is far less demand for office space, and absorption rates have also decreased tremendously.
Orange County is a very affluent part not just of California, but of the country as a whole. As a result, it is perhaps no surprise that the commercial real estate market continues to be strong there. Commercial REITs are snapping up properties at rapid rates, further proof that now is the time to invest.