Why Commercial Real Estate?

For more than twenty years, my family invested in residential properties. I think at one time, my dad said he owned around one thousand apartment units. These residential properties were labor-intensive, even with proper management in place. There were many decisions to be made, and there were more expenses to pay on a regular basis than there would be for a typical commercial property. Owning apartments is certainly not a foolish endeavor; there are many successful apartment investors. However, there is more ongoing maintenance on the same property because there are people living in your rentals. And more hours of the day are typically spent living in apartments than in commercial buildings. Plus, extensive trust is needed with your onsite property management. I believe most of us would like a job where we can sit back a little more, make decisions from time to time without being overwhelmed or inundated with multiple management decisions. For me, commercial investment properties fit more of this dream job description.

One of the first commercial investment office buildings I became involved in as a property manager was a 43,000-square foot office property. This building was in a very good location on the east benches of Salt Lake City. One of the main reasons the commercial property was appealing, was that there were approximately 15 tenants instead of our previous apartment building that consisted of one hundred apartment units. These commercial leases were written in a way that required more financial responsibility placed on the commercial tenants than we were accustomed to from our residential tenants. I remember the rental rates at the time or approximately $12 per foot. Within ten years, The rental rates had jumped to nearly $20 per foot. If you do the math, you’ll understand the decision to buy the building was well worth the investment. I’m not purporting that each deal will turn out this well, but I am simply illustrating a notable example.