Maryland Commercial Real Estate Market Trends Analysis

Industrial real estate means commercial properties that are usually rented by Business to Business (B2B) companies. Industrial tenants may be manufacturers and middlemen such as supply houses.

However, currently, there is an increasing number of industrial properties whose renters are online order fulfillment centers that disburse items straight to the customer.

The owners of industrial assets are also long-term investor-landlords. Their investment projections count on income from both lease and the eventual liquidation of the property. Industrial leases can be structured on either gross or net rent terms.

Annual and 10 Year Population Growth

Population data is vital for industrial investment plans for reasons that are different from residential investments. A shrinking population has a less direct effect on industrial properties by way of a shrinking tax base. If the local government cannot gather enough taxes, it cannot maintain its obligations to adequately administer the infrastructure that industrial tenants necessitate.

A decreasing population is an accurate indication that commercial property values are presumably to shrink as well. A significant consideration for industrial tenants is the access to qualified employees. These tenants won’t be comfortable betting on an area that does not provide an expanding number of potential employees.

Property Tax Rates

As we saw with apartment building investments, tax rates are a good prediction of the economic health of a possible location. Inconsistent tax rates stop you from accurately evaluating your expected profits in that market.

Investors may need to learn more on commercial and industrial real estate taxation and commercial real estate tax reduction from our informative articles.

Accessibility

Businesses that rent industrial properties transfer large items or significant numbers of them. Big tractor-trailer trucks are utilized to ship these items. If the company is adjacent to significant roads, trucks can get to them more quickly and without difficulty.

There are industrial businesses that use trains or airplanes to haul their goods. Industrial properties that are located adjacent to an interstate make this easier, which makes the property more valuable.

Utilities

Businesses that make goods themselves require significant levels of water and power. If an industrial property does not have required utilities, it will limit the types of tenants that will rent there.

Retail investment properties rent space to businesses whose customers are ordinary consumers in the area. They could be in a property by themselves (single-tenant) or in a building with other renters (multi-tenant). Retail companies that want to be alone include banks, pharmacies, restaurants, or auto equipment centers.

Multi-tenant premises can be two or three space facilities, small “strip” shopping centers, significant “big box” or grocery store shopping centers with nationally known anchor tenants. Shopping centers that incorporate condos or apartments, offices, and retail shops are called “lifestyle” centers.

Retail leases are “net” with renters being responsible for the owner’s tax, property insurance, and maintenance of common areas as additional rent. Net leases additionally specify that the renter pays for the upkeep of the property.

A retail investor will use the identical demographic data that their desired renters utilize to locate an acceptable investment property.

Population Growth

The overall numbers and percentages for the complete market are just the beginning for retail property investors. They also look at the area’s submarkets. Retail sites need to be visible and accessible to their customers as they go about their lives.

An improving trade area population is a plus, but if the current population does not hold sufficient customers, it is designated an unsuitable “green” market. Investors in retail properties will analyze all categories of populace data such as population size, annual and 10 year growth numbers, and how many people are employed in the trade area.

Median Income

Income standards tell retailers where their customers are. Median income information is a lead to the customers who can pay for costly items from luxury stores or those on a tighter budget who have to have discounted prices.

Median Age

The age of the region’s populace could be significant to businesses renting your retail property. If a retail property is located close to the age groups that potential tenants require, it is simpler to draw tenants.

Property Tax Rates

Retail real estate investors utilize real estate tax rates the same way as both apartment complex and industrial investors. Larger taxes add to the total of additional rent charged to tenants which can hurt leasing efforts, and have an adverse effect on property values also.

Having your real estate incorrectly assessed by the county is a frequent problem leading even to further waste of money. If there is a mistake, the best commercial real estate lawyers in Maryland have a plan on how to protest property taxes.

Office landlords rent working locations to businesses. Office properties might be big enough for 1 worker or tens of employees. Large companies often rent office space from others instead of using their corporation’s cash to acquire or develop space.

Office tenants execute a “full service” lease agreement which is additionally categorized as a gross lease. These types of lease agreements add the landlord’s costs, including tax and property insurance into the rent. The terms can be updated according to the tenant and owner’s needs.

Long-term investments such as office properties provide ongoing rental revenue and the anticipated income from the eventual sale of the real estate.

Population

Office real estate investors need demographic data that indicates the availability of suitable employees for their favored renters. This consists of the populace’s size, age, and education level. It’s important for investors to know what their potential renters want and to evaluate the region appropriately.

Property Tax Rates

Growing towns that possess a desirable pool of possible office employees will have understandable, consistent tax rates. An acceptable labor pool draws good office tenants.

Incomes/Cost of Living

Office lessees see current wage levels as one indication of the qualifications of the labor pool. It additionally gives them an indication of the salary standards required to contend for the optimum employees.

Education

The amount of education completed by the possible market’s population is specifically important to large office tenants. A call center may not need college graduates, but an attorney services business could.

Buy, rehab, rent, refinance, and repeat (BRRRR) is an investment plan that builds a portfolio of leased properties. It’s a Buy and Hold investment because the investor owns the property for a long period of time. The benefit is that the asset creates revenue while you keep it and could be liquidated later on at a profit after its value has appreciated.

After the property is bought and repaired, it is rented to a tenant. As soon as they can, the investor obtains a “cash-out” refinance that enables them to pull funds out of the property in cash. The funds are used for the cash investment in an additional property, and the procedure is duplicated.

It’s unlikely to get approved for a regular multifamily loan for a building necessitating a serious renovation. Traditional financing institutions don’t finance this kind of projects because they are too risky.

Browse our directory of commercial real estate service providers to find the top commercial rehab lending companies in Maryland and the best Maryland commercial hard money lenders.

Also, don’t forget about the expert knowledge of the top commercial and industrial real estate agents in Maryland. They will consult you about the important local property dynamics described further.

Median Gross Rents

Investors should realize how much rent they can charge and if it is likely 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

Real estate values have to be growing in the community for a buy and hold investment to be successful.

Population

The critical population statistic for buy and hold investments is the growth rate. Anemic housing markets that they want to bypass will show static or declining rates.

Income

Apartment complex investors need to find out the income level of their potential tenants. You don’t want a Class A high-end multifamily complex in an area of mid or low level incomes.

Property Tax Rates

Higher tax rates will stifle both short-term and long-term profitability. Reliable tax rates are a signal of a vibrant, growing economy.

This becomes even more important when your real estate is incorrectly valued by the local tax assessors. If that is the case, you may benefit from the expertise of the best commercial property tax consultants in Maryland and the top-rated Maryland commercial property appraisers.

To a real estate investor, property development means the creation of any commercial property or an entire residential neighborhood. Developers need land that permits the development of parcels bought by homebuilders or commercial structures that are leased.

This involves acceptable zoning, site work design by civil engineers, construction plans for improvements, and the okay from the local government. When all of the work is properly finished, the developer oversees the construction work and marketing of the completed project.

Real estate development can take years to finish. In that time, economic and legislative changes can impact the investor’s profitability. This instability makes real estate development the most speculative kind of real estate business.

A project can be interrupted by different events causing a long delay before resuming development. If the builders are away from the site, the building can get damaged. The best commercial real estate insurance firms in Maryland help professional builders avoid financial damage resulting from such events.

Insurance is a service you will need to show lenders while applying for financing. Ask the best commercial construction real estate lending companies in Maryland whom of the local insurance firms they accept.

Population

Real estate developers utilize the identical demographic data that their possible buyers and renters look at to find markets with acceptable levels of populace size and growth, economic strength, and educational achievement.

Income

Salary statistics will tell investors whether the shoppers and diners in the location are the people that their renters need. A location that does not draw a high-end retail store might be exactly what a moderately priced tenant is after.

Office and industrial renters will want to discover the pay rates that their possible labor pool will expect. Those developers analyze income data as one indication of a site’s potential for success.

Education

Employers that lease space in industrial and office buildings have specific education information in mind for their locations’ residents. The majority of office tenants need college graduates for their workforce. Industrial employers look for a higher concentration of high school degrees.

Age

Most developers like to find a young to middle-aged population that supplies a reliable tax base. These are the workforce that office and industrial renters have to have. Involved employees and their households shop at stores and restaurants that lease retail real estate.

Residential real estate developers require the identical age category because they are probably moving up the social ladder, which stimulates home sales.

To invest in real estate notes, the investor is charged less than the outstanding amount for loans currently in effect, and takes over from the original lender. Lenders are normally enabled to sell loans in order to boost their funds, but they often liquidate because the loan is “non-performing”.

A portion of promissory note investors will restructure the loan to enable the borrower to make their debt payments — for a long-term profit. They realize that if the borrower stops making payments, they can take back the collateral and unload it, which is a feature of the plan.

Population

Population size and growth speed are critical to these investors for the identical rationale as the rest of investors. Investors understand immediately if an area is a possibility by analyzing population information.

Property Values

Property market worth growth rates are critical to the promissory note investment methodology. The reliability of the property is the strength of the investment.

Property Tax Rates

When property taxes escalate on a regular basis, borrowers who have trouble making their loan payments will find it difficult to keep up. That picture damages long-term investors, but it helps short-term note investors who prefer to turn around their investment immediately.

Another method to invest in the purchase and oversight of real estate is to purchase shares in a REIT (Real Estate Investment Trust). Rent receipts and periodic property sales generate the REIT’s revenue.

REITs are required to distribute ninety percent of their net revenue in dividends which appeals to many investors. Modest investors prefer REITs because they may sell their shares at any time.

People who invest in shares in a REIT have no vote in which properties are bought or the way they are handled because they are passive investors.

Investors, when they need to step away from active investing but opt to stay in real estate, will want to learn more about REITs. They sell their own real property to reinvest the capital into REITs.

A tax deferred exchange is meant to save money for investors who intend to do this. Our guides — Can You Do a 1031 Exchange to REIT Shares? and What Is a DST 1031 Exchange? — will help you to understand the advantages and rules of this investment vehicle.

A 1031 Exchange facilitator will be required by the Government to have a role of a middleman in the transaction. Contact some of the best 1031 exchange Qualified Intermediaries in Maryland delivering this service.

One more investment option that pools cash from people to invest in real estate is a real estate investment fund. These entities possess interest in organizations that invest in real estate, such as REITs.

Investment funds aren’t obligated to pay out their profits to shareholders. Like with other stock funds, the return is created by appreciation in the value of their stock.

The most popular investment fund types are mutual funds, ETFs (exchange-traded funds), and private equity funds for high net worth individuals. Shareholders are permitted to liquidate their shares if they want capital, similar to REITs.

Share buyers are passive investors who are never involved with the choices of the fund’s management.