Over the past two decades, commercial real estate has seen average returns that consistently hover in the double-digit realm. In fact, a 20-year average shows 10.1 percent returns on an ongoing basis. Despite the reliable profitability of the sector, some Texas investors may be concerned about the potential for a downturn in the market
It’s important to note that commercial real estate is a cyclical market that naturally involves some periods of growth and decline. In 2016, returns fell below that 10.1 percent number for the first time since the financial crisis eight years before. Some projections show that 2018 and 2019 results will also fall below double digits. However, the numbers still show ongoing growth and do not indicate a systemic downturn. Projections continue to indicate that investment in the sector is positive and growth-oriented.
Because of the nature of the investment, commercial real estate is optimally designed for long-term profits. Rather than the short-term volatility associated with stocks and bonds, real estate investments provide shelter in real market downturns. Because real estate is not a liquid investment, it takes time to buy and sell properties. This means that the sector is less prone to panicked decisions and hasty choices.
Commercial real estate is continuing to show solid growth potential, pointing to significant profits while maintaining a solid basis for a portfolio. A real estate lawyer can provide counsel to an entrepreneur considering investing or expanding in the sector. If necessary, legal counsel could review contracts and transactions in order to help an investor get the most out of a real estate deal.