Massachusetts Commercial Real Estate Market Trends Analysis

Industrial real estate means commercial properties that are often leased by Business to Business (B2B) companies. B2B companies either make or distribute goods to other manufacturers or retailers.

Lately an additional type of industrial tenants has been developed by fulfillment centers that deliver online orders to retail clients.

Industrial property investors will hang onto the property long-term and serve as the landlord. These investments benefit from both income (rent) and the expected appreciation in the value of the property. Lease contracts are either gross or net.

Annual and 10 Year Population Growth

Population statistics are vital for industrial investment strategies for reasons that are dissimilar from residential investments. They don’t rent to the public, however they need to see an increasing amount of taxpayers in the market. If the local government cannot receive enough taxes, it cannot keep up its responsibilities to sufficiently repair the infrastructure that industrial tenants have to have.

A declining population is a reliable signal that commercial property values are likely to shrink as well. The tenants for industrial properties require a consistent local workforce. These tenants will not be satisfied gambling on a market that doesn’t provide a growing number of possible workers.

Property Tax Rates

Real estate taxes are the same economic indicator for industrial real estate investors as they are for apartment complex investors. Reliable tax rates are the sign of a foreseeable area for your investments.

Our experts wrote informative resources about commercial real estate taxation and commercial property tax reduction methods to help you get educated about taxation better.

Accessibility

Businesses that lease industrial properties ship big items or significant amounts of items. Tractor-trailer trucks are typically used to do this. Industrial property investors hunt for properties that are close to significant highways that large tractor-trailer trucks can get to quickly.

Occasionally industrial companies ship their products by airplanes or trains. Interstate highways typically go adjacent to those kinds of terminals which is an advantage for industrial properties placed near those highways.

Utilities

Companies that make products themselves require significant amounts of water and electricity. If a property does not offer sufficient amounts of these utilities, some renters will search elsewhere.

Companies that are located in retail spaces sell directly to the population in the region. This includes single-tenant and multi-tenant properties. Single-tenant assets may contain a bank, a pharmacy, a dining establishment, or an automobile service store.

Multi-tenant premises can be 2 or 3 unit properties, little “strip” centers, large “big box” or grocery shopping centers with national anchor tenants. “Lifestyle” retail shopping centers can combine retail, office, and residential spaces.

Retail owners utilize “net” leases that require the tenants to separately take responsibility for the property’s taxes, insurance, and maintaining the common areas including the parking areas. Retail tenants additionally have to maintain the property.

Retail renters have particular site requirements that retail investors go by when reviewing demographic data.

Population Growth

The overall specific data and ratios for the whole market are just the beginning for retail real estate investors. The vital data will correspond to the specific trade area surrounding the marketed investment property. Retail sites need to be visible and accessible to their shoppers as they go about their lives.

A trade area that doesn’t currently contain sufficient “rooftops” will not satisfy retailers even if it is expanding. Retail real estate investors have to analyze the current population growth, average yearly population growth, decade population growth, and daytime population.

Median Income

The population’s income levels are a significant component of retail site requirements. Higher incomes indicate a good place for top end retailers, whereas middle wages are good for blue-collar stores including auto parts stores.

Median Age

Retail property investors depend on age data that different investors ignore. If you need to identify and keep good tenants, you’ll need to choose a building that is situated close to their target age categories.

Property Tax Rates

The earlier description of how property tax rate data is utilized by industrial and apartment building owners relates to retail investors also. Rising taxes are passed on to their renters which decreases their occupancy rates, and the value of their asset could be lessened down the road.

In a city showing elevated property tax rates, it’s even more important to make sure your real estate isn’t overestimated by the government. The best commercial real estate lawyers in Massachusetts can help you with a property tax reassessment process.

Office space is leased to corporations that look for a location for their workers to operate. Office real estate could be a single story flex space or a multi story building. For a lot of major businesses, leasing office space allows them to utilize their capital for the improvement of their business.

Office tenants execute a “full service” lease agreement which is additionally categorized as a gross lease agreement. All of the owner’s expenses are added when the rental payment total is determined. This contract can be adjusted to answer the requirements of the landlord and the renter.

Long-term investments such as office units provide long-term rental revenue and the projected income from the ultimate liquidation of the asset.

Population

The particular demographic data that office property owners use illustrates the number of sought after office employees in the population. This often involves the number of residents living there, their education, as well as median age. It is vital for investors to understand what their prospective clients require and to assess the market appropriately.

Property Tax Rates

Vibrant towns that possess a desirable pool of possible office workers will have expected, predictable tax rates. Strong lessees will look for that kind of environment.

Incomes/Cost of Living

Office tenants see existing wage levels as one indication of the quality of the labor pool. It additionally gives them an indication of the salary standards required to contend for the best workers.

Education

The amount of education completed by the possible location’s populace is specifically significant to big office tenants. A call center may not need college graduates, but a law services lessee might.

BRRRR, which means “buy, rehab, rent, refinance, repeat”, is an investing method to increase your assets by taking advantage of the appreciated worth of the property. This is a Buy and Hold investment because the investor holds the asset for a long time. The advantage is that the asset generates income while you hold it and can be sold later on at a profit when its value has increased.

Initially the investor obtains a rental property, then they fix it up and secure a renter. When a positive cash flow is established, the investor takes cash out of the asset by refinancing their loan. The funds are utilized for the down payment for another asset, and the process is done again.

You won’t be able to get issued a regular multifamily mortgage for a building requiring a considerable renovation. Conventional lending companies prefer not to approve such projects because they are too risky.

PropertyCashin’s directory of commercial real estate vendors may shorten your way to the best Massachusetts commercial hard money lenders as well as the best commercial rehab lenders in Massachusetts.

Also, don’t forget about the real estate knowledge of the top commercial and industrial real estate brokers in Massachusetts. Read on to understand what indicators it’s best to discuss with them.

Median Gross Rents

Investors have to know the amount of rent they can collect and if it’s probable that rents will increase in the future. This single item carries a lot of weight when the final market determination is made.

Property Value Growth

Buy and hold investments clearly need assets that are likely to increase in worth.

Population

The important populace information for buy and hold investors is the growth rate. Sluggish housing markets that they want to avoid will show flatlined or declining rates.

Income

To invest in the right investment property, investors should be familiar with their desired renters’ level of income. You don’t want a Class A high-end apartment community in a market of mid or low level wages.

Property Tax Rates

Unreasonable or rising taxes will hurt an investment. Stable, appropriate taxes are a good signal that the community is a reliable place for your project.

Keep in mind that local tax offices’ estimates of property market worth are sometimes inaccurate, which makes owners pay too high tax amounts unknowingly. To conduct a tax protest procedure, talk to the best commercial property tax consultants in Massachusetts as well as best Massachusetts commercial real estate appraisal companies.

The industry understanding of development typically means entire residential neighborhoods or commercial ventures of just about any scope. The developer must find land that falls under their specifications so that they can prepare housing lots for sale or commercial leasing properties.

Property development includes dealing with zoning authorizations, overseeing sitework plans created by civil engineers, working with engineers and architects on building plans, and shepherding the project through the local government for authorization. When all the plans are authorized, the site work and construction are completed and buyers or tenants are located.

Real estate projects can take years to finish. During that period, economic and regulatory shifts could impact the project’s profitability. This instability makes real estate development the riskiest type of real estate business.

A project may be paused by different factors that cause a long delay before renewing construction work. While the builders are away from the site, the site can get damaged. The best commercial property insurance companies in Massachusetts help local developers avoid financial damage caused by such events.

Insurance is something you are likely to need to present to lenders when submitting documents for financing. Ask the best commercial construction lenders in Massachusetts whom of the local insurers they accept.

Population

Developers utilize populace size and growth speed in conjunction with economic and education statistics to make sure that there will be enough retail shoppers and housing buyers in the region.

Income

Wage levels will tell investors whether the customers and diners in the area are the customers that their tenants require. A location that doesn’t attract a high-end retail store might be exactly what a low priced company is searching for.

Office and industrial tenants will want to see the wage rates that their possible labor pool will expect. Developers know this, and process wage levels to project a market’s attraction for their target tenants.

Education

Businesses that lease space in industrial and office developments have specific education requirements in mind for their sites’ residents. The majority of office occupants need college grads for their employees. Mid level companies are happy with high school grads.

Age

Developers hunt for a median age that indicates residents who are active workers and taxpayers. These are the workers that office and industrial renters have to access. Involved employees and their households shop at businesses and restaurants that lease retail units.

A working age population additionally contains the most involved homebuyers that residential investors require.

Investing in promissory notes involves paying less than the payoff amount for a loan that is in place so that the investor becomes the lender. Lenders sometimes sell loans to raise cash, but they normally sell them due to them not performing as promised.

One mortgage note investment strategy is to create a new payment schedule that’s easier for the borrower to meet, and retain the investment in place long-term. If the borrower can’t pay anymore, the investor has all the foreclosure rights of the first lender and will foreclose to repay their invested amount.

Population

One of the most fundamental factors in real estate investing of all kinds is the magnitude of the market’s population and whether it’s expanding. This information is a fast assessment of the future economic reliability of the area.

Property Values

Property growth rates are significant to the mortgage note investment methodology. The expanding worth of the property eases the risk of the investment.

Property Tax Rates

In an area with growing tax rates, the larger expense of having real estate may push borrowers into default. This picture hurts long-term investors, but it benefits short-term note investors who aim to profit from their investment immediately.

Real estate investment trusts (REITs for short) are investment organizations that acquire and oversee revenue generating properties. Their revenue comes from rents and the periodic sale of properties.

Because they are a trust, REITs must distribute 90% of that income to its shareholders. Small investors like REITs because they are able to unload their shares when they want.

People who acquire shares in a REIT have no vote in which assets are bought or the way they are operated because they are passive investors.

Investors, when they need to step away from active investing but need to stay in real estate, look into buying REITs. They liquidate their own real estate to reinvest the money into REIT shares.

In this case, conducting a 721 exchange is the most beneficial plan. Learn details about tax-deferred exchanges from our guides: What Is a 721 Tax Deferred Exchange? along with Pros and Cons of a 1031 Exchange into DST.

IRS requires that you request assistance from a 1031 Exchange facilitator to deem the exchange correct. Find them in PropertyCashin’s directory of the best 1031 exchange Qualified Intermediaries in Massachusetts.

One more investment vehicle that pools cash from people to invest in real estate is a real estate investment fund. These organizations do not hold real property — they possess interest in ventures that do, like REITs.

Investment funds aren’t obligated to distribute their profits to shareholders. The investment revenue to the shareholder is the expected appreciation in share worth.

A real estate fund could be a mutual fund, a private equity fund for high net worth investors, or exchange-traded funds (ETFs). Shares in real estate funds are purchased and sold on the public market which is good for inexperienced investors.

Share owners are passive investors who aren’t participants in the decisions of the fund’s managers.