Columbus Real Estate Investing: Generate ROI with 5 Commercial Property Types Friday, June 23, 2017
If you have been an avid investor over the last few years, you know that there hasn’t been a better buy than Columbus real estate. Home prices and sales continue to trend upwards, population growth shows no sign of slowing down, and business expansion is seemingly the norm. So, why are you waiting to make that commercial real estate investment?
The Arch City not only has a diverse population; it also has many different types of real estate, ripe for your investment. Commercial real estate in Columbus, Ohio primarily includes apartment buildings, retail centers, industrial warehouses, land for sale, and office buildings. As such, determining where you put your money is immensely important. Below are some considerations for each property type.
Apartment buildings: A profitable Columbus real estate investment?
As we alluded to above, Columbus, Ohio is one of the fastest growing cities in Ohio. According to the U.S. Census Bureau, Columbus is the 14th largest city in the U.S.; it’s also the largest city in Ohio.
What does this mean for buying an apartment building? It’s good news for Columbus realtors and investors alike.
Aside from enormous population growth in Columbus, there are more and more renters. Millennials, steeped with college debt and faced with lower wages and underemployment, are turning to renting or buying apartment units, rather than buying a house. Need more reasons for buying an apartment building for sale? Here are a few aspects to consider:
- Cash Flow: As all the evidence indicates, Columbus apartments are in high demand. And, The Columbus Dispatch recently reported that the average rent had increased four percent each year for the last several years. Steady cash flow is the apparent result of investing in an apartment building for sale in a great Columbus real estate climate.
- Maintenance Costs: Buying an apartment building means you’re investing in a structure that’s built to last with relatively little upkeep. We are not advocating for an investor to refrain from regular maintenance of the property; costs can be measured easily, thus, simplifying the cost versus income ratio.
- Depreciation: According to rules set forth by the Internal Revenue Service, you can claim depreciation expenses on your tax returns. What is depreciation? Essentially, it is the reduction in value of an asset (in this case, Columbus real estate) due to normal wear and tear. Building owners can significantly decrease their tax burden and ensure that more income ends up in their wallets. Thanks, Uncle Sam!
- The Millennial Factor: The Millennial generation comprises a huge chunk of the rental market, and Columbus has a vast millennial population. More and more young people are flocking to this thriving and unique city. (National Geographic even published an article titled, “Why all the cool kids love Columbus, Ohio.”) Thus, this type of Columbus real estate couldn’t be a wiser investment!
There are many positives to a Columbus real estate investment in an apartment building; however, there’s always a good chance that some units may be unoccupied. As a result, a loss of a tenant for a month or longer will ultimately reduce your overall profit.
That being said, the amount of missed revenue due to an unoccupied unit could be negligible. For example, if you owned a 100-unit apartment complex and ten units were vacant, you are only missing out on 10 percent of your total potential income while still enjoying 90 percent of it. In comparison, if you owned a one- or two-family home and it became partially or entirely vacant, you could be missing out on 50 to 100 percent of your income. You’d also be stuck with the responsibility for major expenses such as financing and maintenance.
Despite recent news of store closings, retail centers are still popular in Columbus.
Unlike apartment complexes, a Columbus real estate investment in a retail center, strip mall, or store does not always provide a steady cash flow or high returns. Why? Shopping habits parallel the economy and are extremely sensitive to downturns. Even if the economy is doing well, reputable stores may struggle or go bankrupt; this is because they can’t keep up with a rapidly evolving industry. (Think: Payless ShoeSource going under, after facing stiff e-commerce competition.)
With all the negative news surrounding major retailers shutting their doors, there is still an abundance of opportunities for those willing to invest in the retail sector of Columbus real estate. Read the following actions you can take to ensure success in today’s market:
- Choose properties in key areas with tons of diverse people and growth opportunities, such as Columbus. Strategically placed stores can be successful even in a competitive industry. It is not a coincidence that Columbus houses the headquarters of Big Lots, LBrands, and DSW.
- Do your research. You have an array of store types and sizes from which to choose. As such, you may want to consider your ideal tenant before purchasing a property. For instance, buying a strip mall could mean that you prefer smaller, more local retailers. Don’t walk into this purchase blindly. Consider whether your ideal tenants will sell the products or services that succeed in the rapidly changing economy.
- Opt for longer leases (which is common in the retail space) to minimize durations of vacant space within your Columbus real estate investment property. This may be an obvious point, but design your lease agreement in a way that attracts the tenants you want. Hold your ground!
Columbus realty is also an excellent choice because more fashion designers live here than any other American metropolis (except for Los Angeles and New York). Also, the Columbus College of Art and Design produces a consistent lineup of talented designers. The demand for retail space will likely grow, as many people will be interested in opening their own boutiques.
Industrial warehouse space is all the rage in today’s digital era.
As previously touched upon, the traditional retail industry is at a unique crossroads, as more consumers order products online. The process is rather effortless for consumers. They surf the web from the comfort of their homes (or mobile phones), click a few buttons, then a package magically appears right on their doorstep; sometimes it’s even delivered on the same day they placed their order! However, this process isn’t derived from magic, and these objects don’t appear out of thin air. Products are housed in massive warehouse spaces all over the country, and go directly from the warehouse to the consumer; demand for these warehouses is only growing.
In fact, the Urban Land Institute (the oldest and biggest network of multi-use real estate and land use experts on the planet) recently labeled the industrial category as one of the hottest prospects in commercial real estate investment. It’s not hard to understand why, when you consider companies, like Amazon, buying up storage spaces that are millions of square feet. Amazon, along with UPS, FedEx, and others, are looking for arms (small, medium, and large) all over the country, especially near populated areas like Columbus.
A possible con to investing in an industrial warehouse space is that there is often only one tenant, so even a short period of vacancy will significantly hurt your pockets. Nevertheless, the chances of a vacancy are rare; warehouse space is in such high demand, and seems to be where the future of commerce is heading.
Undeveloped land gives investors the ability to start with a clean slate.
Perhaps you don’t know what kind of Columbus real estate property you want to invest in yet. You just think that a particular area has enormous growth potential and you want to claim a stake for yourself. In this case, land is a smart choice for you. There are so many benefits in this type of commercial real estate investment, including the following:
- If you purchase land in a coveted or rapidly growing area, you can be confident that developers will be interested in purchasing the land from you. Let the land appreciate over time before selling it for top dollar; also let multiple commercial real estate developers duke it out to outbid each other’s price.
- You could develop the land yourself! Observe the area; find out what would be a welcomed addition and a natural fit. You might just have a gold mine (no, not literally) on your hands. In Columbus, the tourism industry is exploding, as the city hosts many conventions, meetings, trade shows, entertainment events, and more. Taking this information into consideration, it might be wise to build a hotel, an inn, or any other building that non-locals would visit.
- If you don’t want to sell your land to a CRE developer or build on it yourself, there’s another option; you can rent out the land for uses such as parking or even farming.
Keep in mind that you might run into some complications with land investment; some road blocks may include restrictive zoning rules, nearby pollution, and paying property taxes on unused land. Buying land can be tricky, but there are substantial profits to be made if you do the proper research. You may even want to think about a commercial real estate appraisal before you buy. Having your land appraised could be worth the expense.
Whatever you decide, have a good plan and prepare for any and all scenarios.
Office buildings are a fantastic investment in a growing metropolitan area.
When it comes to business startups, sources such as The Kauffman Index reported that Columbus, and the state of Ohio, is a great place to establish your company. Not to mention an August 2016 article in Venture Beat, which indicated that “the Midwest will have more startups than Silicon Valley” in the next five years. The article by Venture Beat focused specifically on Columbus, Ohio as a hotspot for small business development. Are you convinced that it is a perfect time for a Columbus real estate investment?
There may not be a better time for a commercial real estate investment in an office building, than now. If we look at the wider landscape, the job market is strong and more companies are seeking urban areas to attract skilled talent. Proximity to colleges and universities is also a plus; being closer makes it easier to nab young, knowledgeable employees and interns. It just so happens that Columbus is home to one of the largest universities in the country: Ohio State!
As with retail space, office properties are also attuned to economic conditions; therefore, vacancies can be a real problem during an off year. To combat this risk, you can consider long-term leases for your Columbus real estate. It’s also a good idea to seek buildings that have tenants in place, rather than trying to attract them to an empty building. Columbus is home to many successful corporate tenants, such as Express, which generates billions in revenue.
There are so many commercial real estate investment possibilities. What’s next?
CRE opportunities are abundant in Columbus, Ohio (and throughout Central Ohio)! Ready to buy? Still need more guidance? For nearly 80 years, The Robert Weiler Company has worked tirelessly to facilitate Central Ohio, and especially Columbus real estate, investments. Call one of our seasoned CRE brokers at 614-221-4286 to help you effectively decide on your next investment.