Many Pennsylvania entrepreneurs are interested in investing in commercial real estate. A property investment can provide much-needed space for office activities, retail, storage or other business activities. In addition, this purchase can be a long-term positive that goes beyond simply a space to work or do business. There are some key guidelines that business owners can keep in mind when planning for a real estate acquisition.
When it comes time to build a storefront or office in Pennsylvania, most business owners must apply for a real estate loan. These loans can be very complex, and that is why borrowers need to spend some time researching how they work and what types of financing options are available. With the right loan, an entrepreneur won't have to worry about an unmanageable payment plan or hidden fees.
According to the Mortgage Bankers Association's annual report, 2018 will not be as strong for the commercial real estate market as 2017. The group cites slow growth in net operating income and rising interest rates as among the reasons why anyone considering investments in CRE ventures in Pennsylvania may wish to proceed with caution.
Some people would say that small businesses are the backbone of the American economy. However, for these small businesses to survive and thrive, they need to have access to funding, which can come in the form of either an investment or a loan.
Stakeholders in the Pennsylvania commercial real estate marketplace might want to turn their attention to co-working and flexible office space. While co-working offices account for a small percentage of the available square footage, it has been quickly growing since 2010.
Citizens of Pennsylvania might be surprised to learn that the beginning of 2018 did not bode well for commercial real estate; nationwide prices dropped by 0.3 percent just last month alone. This drop was the latest in a series of consecutive drops that has lasted nine months so far. These declines have been interpreted by some as the real estate plateauing after having reached historic highs.
Pennsylvania residents may be impacted in a variety of ways by the GOP tax bill. Those who profit from commercial real estate holdings may benefit in a couple of different ways. First, it may be possible to create a pass-through entity and receive a 20 percent tax deduction on those earnings. This may be available to individuals who are making less than $157,500 or joint filers making less than $315,000.
Pennsylvania business owners that are looking for commercial real estate to lease and property owners with available space should expect to have to negotiate their leasing terms. Due to the condition of the commercial real estate market, business owners may have the upper hand. For example, someone who owns a business park that is sparsely occupied may allow generous concessions in order to obtain a commercial tenant. However, if the commercial real estate market is thriving, or the commercial space in question is a highly sought-after space, it may be the business that is attempting to lease the space that may have to allow significant concessions.
A business owner in Pennsylvania may eventually find that their current workplace no longer meets their needs. The reasons for this could include significant business growth, a need to downsize or other changes that make the current facility unsuitable. If the business is currently operating in a rented space and the lease is not about to terminate, the business owner may need to develop an exit strategy.
Most commercial real estate markets in Pennsylvania and around the country should continue to provide healthy returns for investors, according to a panel of industry experts. At a Nov. 3 meeting of the National Association of Realtor's Commercial Economic Issues & Trends Forum, leading economists and bankers talked about the opportunities and challenges real estate developers and investors may face in the year ahead. They also pointed out that the economic data does not always align with prevailing media narratives.