As we begin to shift to a post-pandemic world, changes in the office sector are occurring. Tenants are returning to office spaces, reducing vacancy rates within the Orange County market. However, transitioning to a post-pandemic environment is expected to remain slow, as many businesses are reluctant to make big moves. For those ready to occupy their next space, buying may be the best option.

At a Glance: Why NOW is the time to BUY!

Let’s paint a picture.

Individuals make money when they buy, and they capitalize on it when they sell. We believe now is the best time to buy due to the cyclical nature of real estate. Investors strive to acquire real estate at its lowest price with the anticipation of selling it when the market peaks. Think: buy low, sell high.

However, identifying the exact time to purchase an asset can be challenging and often deters potential investors from ever pulling the trigger. So, now is the time to change the way we look at the right time to buy commercial real estate.

We should look at the real estate trend line as a lightning bolt, one that is always heading upward.

There will be times when the market trends downward or below previous levels, but it typically trends skyward. If we look at the past, we will always see missed opportunities – however, we should be looking ahead, and the sooner a business acquires an asset, the sooner they can begin to see the upward trend in their financial portfolio. 

Furthermore, owner/users can speculate about anticipated changes in the market and leverage trends to make smart real estate investments. For example, current market conditions reveal the following trends.

• Low Interest Rates Will Not Last: Owner/users can currently take advantage of low interest rates. However, this trend may not last. Reports from November 2021 indicate that the first post-pandemic interest rate hike from the Federal Reserve is expected as early as July 2022.
• Do Not Expect a Stay-at-Home Order to Return: Stay-at-home orders took a burden on many industries, and the economic data from the pandemic has shown just how detrimental those orders were. Owner/users can feel secure knowing that the likelihood of a new stay-at-home order is minimal – instead, government officials are supporting economic improvement by encouraging employees to return to the office.

Don’t Fall for the Idea that Now Is the Time to Lease

COVID-era trends in the commercial real estate market, which have seen landlords offering tenants more concessions and lower rents, have deterred many owner/users from acquiring real estate. However, signing a lease amid a pandemic can damage a company’s long-term business strategy. The short-term gains of leasing – such as free rent and high tenant improvement allowances – are simply a deterrent. The real benefits come when owner/users purchase their own real estate.

Benefits of Owning Real Estate

As with any real estate investment, purchasing a commercial space as an owner/user comes with a multitude of benefits. Here are the most prominent ones for commercial investors.

1. Equity: First and foremost, buying real estate allows owner/users to build equity. Instead of paying rent to a landlord, they pay down the mortgage and increase their wealth, both individually and as a company.
2. Tax Benefits: Owning real estate comes with many tax benefits – all of which should be reviewed with a certified public accountant. In a nutshell, real estate offers write-offs and deductibles associated with interest expenses, depreciation expenses, non-mortgage-related expenses, and more. Additionally, owner/users can trade into new properties using a 1031 exchange.
3. Potential for Additional Income: Depending on the building they purchase, owner/users can split the space and rent out additional units.  This allows them to earn additional income to help pay down the mortgage.
4. Known Mortgage Rate: Unlike rent, a mortgage rate (as long as it is a fixed interest rate) does not change over time. This can allow owner/users to plan for the future and build their investment.

Becoming a Property Owner

Before delving into the acquisition process, owner/users must understand the pros and cons of buying versus leasing. After conducting due diligence, potential investors soon discover that they should not overlook the opportunity to purchase in today’s landscape. Once an individual or a company determines it is time to buy, finding the right property is simpler than ever.

Finding a Property

Listing services now offer prospective buyers the ability to search available properties and directly contact the seller’s representative. If owner/users want to preview what is available in their market, Topside Real Estate recommends using the following platforms:

• LoopNet          
• CoStar               
• CREXi                 
• AIR / Catylist

Purchasing Real Estate

Through the use of technology, identifying and purchasing real estate is easier than ever before.

However, understanding and underwriting properties has never been more challenging. 

The abundance of information about the market and available properties is overwhelming and often difficult to synthesize. Add in a typically cyclical market and several new variables unique to the pandemic, the need for professional guidance is apparent. Given the current circumstances, owner/users may want to seek out an experienced real estate professional to help them navigate today’s commercial real estate landscape. An agent can add value by assisting them in identifying the best opportunities and, just as importantly, the ones to avoid.

Learn More About Purchasing Real Estate in Orange County

Topside Real Estate specializes in working with owner/users and office investors throughout Orange County and is prepared to help businesses and investors benefit from today’s market. If you are interested in learning more, contact one of our qualified agents.