For most people, residential investment has been a great option to investing, as it is lower risk, easy to understanding, and a very concrete investment (literally). Also, since the pandemic started, it is possible to see how stable the real estate market is. We are witnesses prices increase for some segments, making the sector looking good, compare to others. Although, the number is good, notably, reduced immigration, unemployment, and economic uncertainty are undeniable facts that impact the whole country and some segments in real estate, specifically residential investing.
So, let’s paint a picture for a second: John has paid his mortgage and feels right to make investing buying a second property. He bought a condo and rent it, and, with the rent, he planned to pay the mortgage, and after a while, he would have his asset paid. Very classic and safe. However, he couldn’t rent the condo as he planned and ended up having to pay the mortgage and all overheard maintenance costs from his condo. Also, selling is no longer an option, which means, he had to face this sunk cost. It’s not John's fault, as no one could see the pandemic coming, but the truth is, as for now, residential is no longer a safe option as used to be.
On the other hand, commercial real estate investing is growing into the investor's eyes, especially warehousing, fulfillment, and medical offices. The first and second ones topped the list of both investment and development prospects in the PwC report (Emerging Trends Real State- 2021). The e-commerce and supply chain disruptions during the pandemic have played an important role in this trend. In the same way, the medical office is considering a really good option as can ensure the stability that the investor is looking for. The main reason is the adoption of virtual health services, leading to an ongoing need for physical space for care that cannot be delivered digitally. As a consequence, the hospital has moved some health care functions to malls, and plazas to be closer to the general public.
The real estate investment outlook, in general, is very positive. However, there are some specific segments that can ensure a better ROI and lower risk, compare to others. An investor must do the homework and understand the specifics that pandemics played in the sector. Commercial investing is scoring better right now and there is optimism on it. If you are planning to invest in real estate, it won’t hurt to do some research and understand better what commercials can offer you. In the future, it can save you from some costs and help to increase the value of your asset.