Is the time right to buy commercial real estate?


CLARKONOMICS: If you’re a business owner, now could be a great time to buy traditional commercial space to house your business.

Commercial real estate has made a recovery after dire predictions that it could be the next shoe to drop on the bailout watch. The threat of a collapsing commercial real estate industry could have taken down banks that had just been bailed out. But I’m happy to report that the latest data shows the market has stabilized.

In some parts of the country, landlords can finally try pushing through rent increases for the first time in some 6 or 7 years. If you’re a commercial tenant, there is still time left to steal a deal in negotiating or renegotiating an existing lease.

Another sure sign the market is turning: Investors are interested in buying commercial property again. There’s a belief that the bottom of the market has been reached (or will be soon) and now is the time to get bargains.

So if you’re renting right now, this could be a good time to buy a structure to house your business. The interest rates available if you can qualify are fantastic. They’re not quite as cheap as they are for residential real estate, but they’re still very low by historical standards.

If you buy now, you lock in your rate for years and years to come. When the recovery comes and rents start to rise appreciably, you’ll be sitting pretty.

One word of extra caution here for retailers. The needs of a retailer change so much over time that a purchase of commercial real estate for retail purposes specifically requires extra thought. But for traditional commercial space you might need in a business park, office building or warehouse, this is a great time to buy.

Editor’s note: This segment originally aired in May 2011.

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