Some California investors in commercial real estate have concerns about falling values. Over two decades, returns on investments in the sector skyrocketed. In 2016, however, the returns fell below the 10.1 percent average for the first time since the financial crisis of 2008. Some forecasts envision that returns in 2018 and 2019 will hover in the range of 6 percent.
In general, the cyclical commercial real estate market goes through routine upswings and downswings. Despite the expectation of an eventual downturn in the sector, however, it may not be coming soon. Colliers International predicts continued growth in 2018. Since no crash is expected in the commercial real estate market, investments should continue to be profitable in the future.
Small downturns that still show profits do not necessarily indicate that a market peak has been reached. Commercial real estate is a sector that is well-tuned for long-term investment. Because real estate takes time to sell and is not a liquid investment, it can help to avoid panicked buying and selling in the sector. This makes commercial real estate a viable investment for long-term returns.
In addition, real estate can help to protect an overall investment portfolio that includes stocks, bonds and other securities from excessive volatility. Because real estate is held for longer periods, it tends to avoid shifts in prices caused by daily trading shocks.
By organizing goals for commercial real estate investment, investors can maximize their profits and gain high returns throughout market cycles. When considering a purchase or investment in a real estate project, an attorney can provide important guidance. Legal counsel could also develop contracts and help ensure smooth transactions.