Commercial Property Investment Perspectives

Commercial property is an important investment class that encompasses all types of office buildings, malls, warehouses, land, industrial buildings and retail stores among other buildings. Greenberg & Company has been a premium brokerage services of commercial property in the Houston area for over 20 years.

Commercial property investors look at several important numbers before making a decision. Firstly, they use the capitalization rate (“cap rate”) which is the ratio of the Net Operating Income (NOI) to the total value of the property. The NOI is the net cash flow of the building after deducting expenses and before taxes. For businesses with extremely stable cash flows in mature markets like Manhattan, the cap rate is low ranging from 3% to 5%. For businesses in more remote areas with volatile NOI, the cap rate can be as high as 10% – 15%.

Secondly, investors look at the occupancy rate and expected occupancy over the first several years. Occupancy determines the stability of cash flows and the opportunity to increase cash flows.

Thirdly, investors determine if, when and how much the property needs to be renovated to keep tenants.

Next, they look at the taxes, demographic and economic trends in the region. Overall regional trends determine whether their is a favorable climate for increased property values. Professional investors look at many other factors as well before making a final decision.

After the purchase, Greenberg and Company will be there to help manage the property as well. Our firm has a tremendous track record of providing sterling management and high profitability to our investors.

For more information, please don’t hesitate to contact us to learn more. Our friendly brokers will provide help with any investing questions you have.