Virginia Commercial Real Estate Market Trends Analysis

Industrial buildings are a class of commercial real estate that is utilized by companies that do business with other companies (B2B tenants). B2B companies either manufacture or distribute products to other manufacturers or retailers.

Recently another class of industrial renters has been created by fulfillment centers that distribute online purchases to retail customers.

Industrial property investors will hang onto the property long-term and operate as the landlord. Their return projections include lease income and asset value growth. Industrial lease agreements can be based on either gross or net rent terms.

Annual and 10 Year Population Growth

Industrial property investors require population data for reasons that are different from residential investors. A decreasing populace has a less direct impact on industrial properties by way of a shrinking tax base. Adequate tax receipts are needed to maintain highways and infrastructure that industrial properties require.

A market that is losing its population will undergo poor commercial property value increase as well as residential. Industrial tenants are ongoing companies that need employees. These tenants won’t be satisfied gambling on a place that doesn’t have an expanding number of acceptable workers.

Property Tax Rates

Industrial investors use real estate tax trends as an indicator of the vitality of a community, similarly to multifamily home investors. Uncertain tax rates reveal an environment that presumably isn’t advisable for your investment’s profitability.

You may want to read more on industrial and commercial property taxation and how to reduce commercial property tax in the U.S. from our guides.

Accessibility

Industrial property renters typically transfer significant amounts of products or bulky products. Large tractor-trailer trucks are utilized to move these goods. Industrial properties need to be close to highways so that large vehicles can get to and from them without trouble.

There are industrial businesses that utilize trains or airplanes to haul their products. This means that being near an interstate, which typically goes close to airports and railway hubs, a big advantage for industrial properties.

Utilities

Production properties frequently require significant amounts of electricity and water. If an industrial building doesn’t contain adequate utilities, it will limit the kinds of tenants that will rent it.

Retail facilities house tenants that sell goods or services to individuals. This encompasses single-tenant and multi-tenant real estate. Sought after renters for single-tenant properties are pharmacies, auto equipment centers, banks, and dining establishments.

A multi-tenant building might be as little as a few units, somewhat bigger “neighborhood” or “strip” shopping centers, or larger shopping centers that are anchored by national brands including grocery stores. Centers that include condominiums or apartments, office space, and retail shops are called “lifestyle” centers.

Retail owners utilize “net” contracts that obligate the tenants to additionally take responsibility for the taxes, property insurance, and upkeep of the common areas like the parking lot. Retail renters also have to handle maintenance of the property.

Retail tenants have particular site criteria that retail investors use when reviewing demographic data.

Population Growth

The overall data for the market under consideration isn’t enough for retail investors. The vital information will correspond to the immediate trade area surrounding the possible investment property. Retailers need to locate where their clients live, commute past, or are employed.

Population improvement is important, but retailers require a minimal amount of clients at this time. Investors in retail assets will analyze all facets of populace information including 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 consumers live. Median income information is a guide to the customers who can pay for expensive goods from high-end stores or people on a smaller budget who require lower prices.

Median Age

The age of the market’s populace could be critical to retailers renting your retail property. If a retail asset is placed close to the age groups that possible tenants need, it is less difficult to enlist tenants.

Property Tax Rates

Retail real estate buyers use real estate tax rates the identical way as both apartment complex and industrial investors. Bigger taxes cause higher rents which inflate vacancy rates, and markets with growing tax rates often have decreasing property values.

You spend even a higher amount of money if the municipality’s tax assessor’s evaluation of your real estate value was wrong. If this happened, the best commercial real estate lawyers in Virginia will tell you how to protest the wrong assessment.

Companies lease real estate for their staff in office buildings. Office properties can be big enough for one person or hundreds of people. For many large brands, renting office space enables them to utilize their capital for the improvement of their company.

Office lease agreements are most often gross or “full service” deals. These kinds of deals add the owner’s costs, including tax and insurance into the payment. You might find adjusted versions of gross leases that are altered to work that specific case.

Long-term investments such as office buildings provide ongoing rental revenue and the projected revenue from the future sale of the asset.

Population

The populace demographic data that office property investors search for should indicate an adequate number of employees for office tenants. They search for the total populace number, their ages, and their education. Knowledgeable office investors acquire assets in markets where their renters want to move.

Property Tax Rates

A well run city or county that draws possible office workers to the area will not have excessive or consistently expanding tax rates. Successful renters will search for that type of community.

Incomes/Cost of Living

Higher incomes could mean an educated population that many office tenants need. It could additionally show the wage standards that employers will need to pay.

Education

The level of education completed by the potential location’s population is specifically significant to major office renters. Some businesses do not have to find college degrees while others do.

Buy, rehab, rent, refinance, and repeat (BRRRR) is a growth plan that develops a portfolio of leased assets. This is a Buy and Hold investment because the investor owns the asset for a long time. The advantage is that the asset creates income while you hold it and can be sold later on at a profit after its value has appreciated.

The investor acquires a residential property, fixes it up or improves it, and leases it out. When a profitable cash flow is documented, the owner takes cash out of the property by refinancing their mortgage loan. The funds are utilized for the cash investment in an additional property, and the process is repeated.

You won’t be able to take a traditional commercial mortgage for a property in need of a serious repair. These investments present an unacceptable risk for traditional lenders.

Browse our commercial real estate service provider directory to contact the top commercial rehab lending companies in Virginia and the best Virginia commercial hard money lenders.

In this resource, you can also find the best commercial real estate agents in Virginia whose professional expertise will be valuable for your business. Keep reading to understand what data you should talk with them about.

Median Gross Rents

Investors need to find allowable current rental rate standards and a history of acceptable rental rate increases. This could impact choices about where to invest and which assets to purchase.

Property Value Growth

Buy and hold investments obviously need assets that are supposed to appreciate in worth.

Population

BRRRR investors will analyze the population increase. Sluggish residential markets that they want to sidestep will demonstrate stagnant or declining rates.

Income

To acquire the correct investment real estate, investors must be acquainted with their desired tenants’ level of income. If you are happy investing in mid-priced real estate, you do not need to see high incomes.

Property Tax Rates

High or rising taxes will be damaging for an investment. On the other hand, stable real estate tax rates can signal an expanding area.

Additionally, in the local tax office’s register, your property can be valued incorrectly, which means you overpay property taxes. If that happens, you may require the services of the best commercial property tax consultants in Virginia and the best Virginia commercial real estate appraisers.

People in the real estate business think of development as creating complete residential community ventures or any type of commercial real estate. Developers need property that permits the development of parcels bought by builders or commercial buildings that are rented.

This requires acceptable zoning, land use design by civil engineers, construction plans for buildings, and permission of the local authorities. Once all of that is properly done, the developer manages the construction work and marketing of the end project.

It could take a year or more from the beginning to finish of a development venture. In that period, economic and legislative changes can impact the project’s profitability. That is why the most financially dangerous method of property investment is development.

Different events sometimes force investors to put a development process on pause. Even when the site is guarded against thieves, nobody can prevent natural disasters from causing damage to the unfinished building. You require assistance by the best commercial property insurance companies in Virginia.

Lenders expect your project to get protected by a reliable insurance. The best commercial construction real estate lending companies in Virginia can provide a list of insurers they deem worthy.

Population

Property developers use the same demographic data that their targeted purchasers and renters use to find neighborhoods with acceptable levels of population size and growth, economic viability, and educational levels.

Income

The income amounts of the area’s people will dictate the type of retail development that the market will support. A place that does not draw a high-end retailer might be exactly what a moderately priced tenant is searching for.

Businesses that lease office and industrial space use wage data as an indicator of their labor costs in that location. Those developers analyze income statistics as one sign of a site’s possibilities for success.

Education

Industrial and office property renters want distinct levels of education in the area’s citizens. White collar companies need to find more college degrees. Industrial employers look for a larger accumulation of high school degrees.

Age

Most developers like to find a youthful to middle-aged populace that provides a consistent tax base. Industrial and office developers need an employable age population. Active workers and their households patronize stores and dining establishments that rent retail space.

Residential property developers prefer the identical age category because they are presumably moving up the social ladder, which boosts residential transactions.

To invest in real estate notes, the investor is charged a smaller sum than the outstanding balance for loans currently in place, and takes the place of the original lender. The original lender could be agreeable to selling because they need money, or because the borrower is behind in their mortgage payments.

Some note investors will renegotiate the loan to help the borrower make their loan payments — for a long-term income. The note purchaser is covered by the mortgage note that the borrower executed and could recover the asset if necessary.

Population

Population size and its growth are significant to these investors for the identical rationale as the rest of investors. This is a quick “sniff test” of the financial strength of the area.

Property Values

A mortgage note investor has to see that real estate values in the market are increasing. The strength of the collateral is the reliability of the investment.

Property Tax Rates

When property taxes increase on a regular basis, borrowers who have problems making their mortgage payments will find it challenging to keep up. This picture harms long-term investors, but it helps short-term note investors who like to profit from their investment sooner.

Another method of investing in the acquisition and oversight of real property is to buy shares in a REIT (Real Estate Investment Trust). They produce income from rent and build long-term property value.

These trusts must disburse 90% of net income to shareholders as dividends. The capability to invest and withdraw your money as your demands dictate make REITs a valuable method for an average person to invest in real estate.

REIT investors are called passive investors which means that they have no activity in the acquisition or operation of any properties.

Real estate owners pondering becoming passive investors are interested in buying REITs. They liquidate their own real property to reinvest the money into REITs.

In this case, conducting a like-kind exchange is the thriftiest solution. Our articles — Exchanging Real Property into REIT Shares with IRC Sections 1031 and 721 and A-to-Z Guide to Delaware Statutory Trust (DST) 1031 Exchange — will allow you to learn the benefits and rules of this investment vehicle.

For this type of transaction, you will have to get help from a 1031 exchange accommodator. Our directory offers the best 1031 exchange companies in Virginia to help you in your search.

Real estate investment funds are another venture that gathers capital to invest in real estate. These companies don’t hold real property — they own interest in ventures that do, for example REITs.

Investment funds aren’t obliged to disburse their profits to shareholders. The investment revenue to the shareholder is the predicted increase in share worth.

Mutual funds, ETFs (exchange-traded funds), and high-end private equity funds are designated as real estate investment funds. Shareholders are permitted to sell their shares if they need funds, similar to REITs.

Investors in funds do not have a thing to do with deciding on assets or locations, meaning they are passive investors.