Commercial Real Estate – Commercial Real Estate Investment Management Software

Commercial Real Estate – Commercial Real Estate Investment Management Software

Commercial Real Estate
Commercial Real Estate

What Is Commercial Real Estate (CRE)?

Commercial real estate (CRE) is land that is only used for business-related activities or to offer a workspace, as opposed to being utilized as a residence, which would fall under the category of residential real estate.

Most frequently, renters are leased commercial real estate to conduct businesses that generate cash. This vast category of real estate can range from a small shopping mall to a single storefront.

There are several types of commercial real estate.

It could be anything, such as an office complex, a duplex, a restaurant, or even a warehouse. Commercial real estate can provide income for people, businesses, and corporate interests by renting it out or by keeping it and reselling it.

Office space, hotels, resorts, strip malls, restaurants, and healthcare facilities are just a few of the different types of commercial real estate.

Key Lessons

  • The term “commercial real estate” refers to properties utilized only for commercial or revenue-generating activities.
  • Commercial real estate is different from residential real estate in that it can result in a profit for the owner through a capital gain or rental revenue.
  • Office space, industrial space, multifamily rentals, and retail are the four primary categories of commercial real estate.
  • For investors, commercial real estate offers the possibility of some capital growth as well as rental income.
  • Compared to investing in residential real estate, investing in commercial real estate typically requires more capital and sophistication from investors.
  • Individuals can indirectly engage in commercial real estate through publicly traded real estate investment trusts (REITs).

The Foundations of Commercial Property

The two main types of real estate property are commercial real estate and residential real estate. Residential properties are those set aside for occupancy by people rather than for commercial or industrial purposes.

Commercial real estate, as the name suggests, is employed in business, and multi-unit rental properties that are homes for renters are regarded as the landlord’s commercial operation.

Depending on its use, commercial real estate is often divided into four classes:

  1. Office space
  2. Industrial use
  3. Multifamily rental
  4. Retail

Additionally classifying certain categories is possible. For instance, there are several different kinds of retail real estate:

  • Hotels and resorts
  • Strip malls
  • Restaurants
  • Healthcare facilities

The different forms of office space are similar. It is frequently classified as being in class A, class B, or class C:

  • Class A buildings are the best in terms of appearance, age, infrastructural quality, and location.
  • Class B buildings tend to be older and less expensively competitive than class A structures.
  • Class C buildings are the oldest, typically more than 20 years old, situated in less desirable districts, and in need of upkeep. Investors frequently target these buildings for rehabilitation.

However, most zoning and licensing authorities classify industrial properties as a subclass of commercial real estate. Industrial properties are locations utilized for the manufacture and production of commodities, notably heavy goods.

Commercial Leases

Some companies own the structures they operate out of. The commercial property is leased, though, which is the more frequent scenario. The building is typically owned by an investor or group of investors, who then charge each business that uses it rent.

Commercial lease rates, which represent the cost to use a facility for a specific amount of time, are typically indicated in annual rental dollars per square foot. Residential real estate rates, on the other hand, are quoted as an annual sum or a monthly rent.

Commercial leases often last one year to ten years or longer, with office and retail space having lease terms of five to ten years as the norm. This might be contrasted with residential leases that are more frequently annual or month-to-month.

According to a study by real estate market analyst CBRE Group, the length of a lease is inversely correlated with the size of the space being rented. The data also demonstrated that, in a rising market situation, tenants would sign long leases to lock in pricing.

But it’s not the only thing that motivates them. Due to the scarcity of properties that meet their needs, several renters who need huge spaces sign long-term leases.

There are four main categories of commercial property leases, and each has a unique set of obligations for both the landlord and the tenant.

  • A single net lease makes the tenant responsible for paying property taxes.
  • A double net (NN) lease makes the tenant responsible for paying property taxes and insurance
  • A triple net (NNN) lease makes the tenant responsible for paying property taxes, insurance, and maintenance.
  • Under a gross lease, the tenant pays only rent, and the landlord pays for the building’s property taxes, insurance, and maintenance.

Managing Commercial Real Estate

Leasing commercial real estate needs the owner to manage it fully and continuously. A commercial real estate management company can assist property owners with finding, managing, and keeping tenants, supervising leases and financing alternatives, and coordinating maintenance and marketability of the property.

As the laws governing such property differ by state, county, municipality, industry, and size, the expertise of a commercial real estate management business is beneficial.

Landlords frequently have to manage increasing rents while reducing vacancies and tenant turnover.

As a result of the necessity to modify space to fit the unique requirements of various tenants, such as when a restaurant moves into a building that was formerly home to a yoga studio, turnover can be expensive for CRE owners.

How Investors Make Money in Commercial Real Estate

Commercial real estate investments have the potential to be profitable and act as a buffer against stock market volatility. The majority of returns for investors come from tenant rents, however they can profit from property appreciation when they sell.

Direct Investment

Investors can make direct investments, whereby they take possession of the real estate and become as landlords.

The greatest candidates for direct investments in commercial real estate are individuals that either possess substantial industry knowledge or have access to firms who do. A high-risk, high-reward real estate investment is commercial real estate. Given that CRE investing takes a sizable quantity of capital, such an investor is most likely a high-net-worth individual.

The ideal property is located in a region with high demand and low CRE supply, which will result in attractive rental prices. The value of the CRE purchase is also impacted by the local economy of the area.

Indirect Investment

As an alternative, investors can make indirect investments in the commercial market by owning a variety of market securities, such as real estate investment trusts (REITs) or exchange-traded funds (ETFs) that invest in stocks related to commercial real estate, or by making investments in businesses that serve the commercial real estate market, like banks and realtors.

Commercial real estate benefits

Attractive leasing rates are one of the main advantages of commercial real estate. Commercial real estate can offer spectacular profits and sizeable monthly cash flows in regions where the amount of new construction is constrained by the land or the law.

Compared to an office tower, industrial buildings often rent for less money, but they also have lesser overhead expenses.

Additionally, compared to residential real estate, commercial real estate benefits from comparable lengthier lease agreements with tenants. As long as the property is occupied by long-term tenants, this lengthy lease period provides the owner of commercial real estate with a sizable level of cash flow stability.

Commercial real estate provides a reliable and abundant source of income as well as the possibility of capital growth, provided the building is well-maintained and kept current.

Additionally, it is a unique asset class that can offer a strong diversification choice to a well-balanced portfolio, just like all types of real estate.

Regulations and rules are the main obstacles for most people who want to directly participate in commercial real estate.

Disadvantages of Commercial Real Estate

Legalese is used to hide the taxes, purchasing procedures, and maintenance obligations for commercial buildings. These specifications vary depending on the state, county, industry, size, zoning, and a variety of other classifications. The majority of commercial real estate investors either possess specific knowledge or have employees who do.

Another obstacle is the higher risk that comes with tenant turnover, which is particularly important in an economy where unanticipated retail closures leave premises vacant with little warning.

The amenities need of one renter in a house typically coincide with those of earlier or upcoming tenants. With a commercial property, however, each tenant could have quite different needs that call for pricey renovations. The building owner must then modify the area to suit each tenant’s unique trade.

Due to the expense of renovations for new tenants, a commercial property with low vacancy but rapid tenant turnover may nonetheless experience a loss.

Purchasing a commercial property is substantially more expensive than buying a residential one for individuals wishing to invest directly. Additionally, although real estate is one of the most illiquid asset types, deals for commercial buildings typically proceed more slowly.

Pros

  • Hedge against stock market
  • High-yielding source of income
  • Stable cash flows from long-term tenants
  • Capital appreciation potential

Cons

Commercial Real Estate Outlook and Forecasts

The U.S. commercial real estate sector suffered significantly during the crisis of 2008–2009, but since 2010, it has consistently posted annual growth. These advances have assisted in recouping the losses from the recession.

According to Forbes, the widespread store closings that began in 2017 and extended into 2018 have made the retail sector in particular a sore point in the larger commercial property market.

For instance, the price of popular mall REIT Westfield Corp.’s stock dropped by nearly 30% between mid-2016 and late-2017 before partially recovering in January 2018. Later in 2018, Unibail-Rodamco SE purchased Westfield for $15.8 billion, forming Unibail-Rodamco-Westfield (URW).

According to the majority of studies, the real estate market is still generally strong. In its 2019 Commercial Real Estate Outlook, J.P. Morgan mainly agreed with this assessment, noting that 2019 marked the tenth consecutive year of rising commercial property prices and rents.

Note that real estate values did not significantly decrease as a result of the global COVID-19 outbreak that began in 2020.

Similar to the stock market, which recovered from its stunning decline in the second quarter (Q2) of 2020 with an equally dramatic comeback that continued through much of 2021, property values have stayed stable or even increased, with the exception of an initial drop at the beginning of the epidemic. This is a significant distinction between the economic consequences that will emerge in 2020 and those that occurred a decade earlier.

What is unknown is whether the majority of Americans’ mandated remote work environment, which went into effect in 2020, will have any long-term effects on the requirements for corporate offices.

What distinguishes residential from commercial real estate?

Private dwelling quarters are the only use for residential real estate. All real estate used for commercial purposes is referred to as commercial real estate.

Hospitals, manufacturing facilities, storage facilities, retail establishments, office buildings, and any other place for a business organization are examples of commercial real estate.

Is investing in commercial real estate a wise choice?

It is possible. Impressive returns and sizable monthly cash flows are possible in commercial real estate, and returns held up well during the market shocks of the previous ten years.

Commercial real estate does, however, carry hazards, just like any other investment.

What drawbacks exist with regard to commercial real estate?

The main obstacles for most people who desire to invest in commercial real estate are rules and regulations.

Without specialized understanding, it can be challenging to comprehend the taxes, mechanics of purchase, and upkeep responsibilities for commercial properties because they are shrouded in legalese.

In conclusion

Real estate that is used specifically for commercial or revenue-generating activities is referred to as commercial real estate. Because it has the ability to generate both rental income and capital appreciation for investors, it differs from residential real estate.

Office space, industrial space, multifamily rentals, and retail are the four primary categories of commercial real estate.

Commercial real estate investing can yield substantial profits, but it typically demands more skill and capital from investors than does residential real estate.

Without having specialized understanding of the industry, anybody can indirectly invest in commercial real estate through publicly traded REITs.

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43 Commercial Real Estate Investment Management Software 2022 Review

Commercial Real Estate Investment Management Software
Commercial Real Estate Investment Management Software

Software and technology related to commercial real estate are developing and growing quickly. It can be difficult to keep up with the constantly changing CREtech and Proptech landscape as new businesses appear on the scene every year and demand for digital experiences rises.

The greatest commercial real estate technology companies offering software and tools to increase productivity and address industry pain issues in 2022 are listed below:

Software and technology related to commercial real estate are developing and growing quickly.

It can be difficult to keep up with the constantly changing CREtech and Proptech landscape as new businesses appear on the scene every year and demand for digital experiences rises.

The greatest commercial real estate technology companies offering software and tools to increase productivity and address industry pain issues in 2022 are listed below:

Capital Projects

  • Procore

Procore is a cloud-based construction management software application built for clients across the globe.

  • BuildingConnected

Buildingconnected provides builders with cloud-based bid procurement services.

CRM

  • Ascendix

Commercial real estate CRM on top of Salesforce and Dynamics 365. Easy-to-use & highly customizable.

  • REthink

REthink Real Estate CRM is the number one cloud real estate application built on the Salesforce.com platform.

  • ClientLook

ClientLook is a leading cloud-based CRM (customer relationship management) system that combines contact management, project collaboration and corporate social networking in one integrated solution.

  • Apto

Apto is a brokerage app developed by seasoned brokers to manage all of your contacts and properties. It provides brokerages with a moldable, cloud-based software solution that brings your full business into one app

Investment Management

  • IMS

IMS provides institutional investors and managers an integrated platform to propel data alignment across the investment ecosystem.

  • Juniper Square

Juniper Square is an intuitive, all-in-one investment management software system designed specifically for the real estate industry.

  • Dealpath

Dealpath empowers real estate investors with a purpose-built platform to drive maximum value from pipeline to portfolio.

Lease Management

  • VTS

VTS gives asset managers & leasing teams a single platform to track deals, manage space & collaborate seamlessly.

  • Leverton

The only true AI powered data extraction platform for corporate documents.

  • VisualLease

Complete lease accounting & management software for FASB/IFRS compliance.

  • RDM

RealAccess allows Real Estate professionals to market, manage, and lease their entire portfolio with ease.

Marketing

  • SharpLaunch

Powerful CRE marketing software that helps building owners, brokers and asset managers save time and streamline their property marketing.

  • Matterport

3D media platform lets you create, navigate, modify & share interactive 3D & virtual reality spaces.

  • Property Capsule

The Property Capsule is a cloud-based technology platform that helps you manage and present your property portfolio.

Property Management

  • Yavica

Yavica offers end-to-end commercial real estate property & asset management tied to Microsoft Dynamics 365.

  • Angus Systems

Angus Systems is the industry leader in operations management software for commercial real estate.

  • Aquicore

Aquicore offers comprehensive energy analytics technology for commercial real estate that automatically reads and compiles data from utility meters and submeters in real-time.

  • Building Engines

Building Engines is a web (SaaS) and mobile provider of property management software for commercial real estate.

  • Buildium

Buildium provides easy-to-use, affordable cloud property management software solutions to property managers and community associations.

  • PropertyMatrix

Manage all of your tenants and properties with the help of the most advanced management software on the market today.

  • AppFolio

AppFolio provides property management software that allows apartment and residential property managers to more effectively market, manage and grow their business.

  • MRI Software

MRI Software LLC is a provider of real estate and investment management software to real estate owners, investors, and operators.

Research & Analytics

  • Cherre

Cherre is a platform to collect, resolve, and augment real estate data from multiple data sources.

  • CompStak

CompStak® is the world’s first comprehensive database of commercial lease deal information (comps).

  • Real Capital Analytics

Timely and reliable transaction data with unique intelligence on market pricing, capital flows and investment trends.

  • Salt.io

A big data CRE company that tells stories and builds data machines with a complete understanding of the CRE market/industry.

  • REIS

REIS provides structured and quality assured commercial real estate data. Gain access to 30 years of market research and economic analyses.

  • Reonomy

With Reonomy’s comprehensive and validated data coupled with powerful analytics, CRE investors and lenders can make faster, more secure, and informed decisions.

  • Realstax

Realstax leverages commercial real estate data to produce market intelligence in real-time.

  • Datex

Datex Business Intelligence (Datex BI) gives you the ability to collect, connect and warehouse your core data. This enables you to better analyze, optimize and automate your business.

  • ProspectNow

ProspectNow has the most complete residential & commercial real estate prospecting database on the market.

  • REscour

REscour is a data platform and decision engine that utilizes proprietary market analysis based on massive data aggregation to identify commercial real estate investment opportunities.

Tenant Experience

  • Bixby

Bixby is a building amenity platform that makes it easy for property owners and managers to provide top quality service to their tenants and residents.

  • Equieum

Equiem offers the complete platform for commercial real estate landlords to engage, delight, and improve the working lives of their tenants.

  • Eden

Top-rated office cleaning, IT support, handymen, and more to make it easy to run your workplace.

  • Sine

Streamline your workplace. Manage visitors, contractors, staff, deliveries and assets across your operations.

  • Comfy

Comfy connects people, places, and systems to drive employee satisfaction, optimize space utilization, and increase building efficiency.

  • HqO

The mobile app for your property HqO is a tenant experience (TeX) platform that helps landlords create places people love.

Valuation

  • redIQ

redIQ automatically extracts detailed data from property financials in seconds and offers a sophisticated underwriting model for multifamily transactions.

  • Bowery

Bowery is redefining the commercial appraisal space through big data, advanced technology, and extensive expertise.

  • PropertyMetrics

PropertyMetrics is web-based valuation and investment analysis software for commercial real estate.