Securing Long-Term Investment Stability

Diversified portfolios that include commercial property are better equipped to withstand market turbulence.

The Premiere Group (Premiere) invests in a variety of asset classes and businesses throughout the United States. Premiere’s dedication to a diversified investment portfolio has been a fundamental objective since day one. Targeting real estate early in the company’s history is one of the reasons why Premiere has been able to more aggressively allocate capital in other sectors.

Investment real estate, specifically commercial, is one of the best ways to diversify a portfolio due to the varied types, markets, and tenants. Commercial real estate (CRE) also offers long-term gains with occupied properties increasing cash flow and valuation over time. In this article, we’ll dive into why it can be advantageous to continue investing in CRE, even in a challenging market.

Investing for Long-Term Gains

Property values typically increase over time, which builds equity for investors. History tells us that the appreciation continues, regardless of short-term market shifts. As the cost of living increases, so does rent, which helps preserve the purchasing power of the investment. 

Although owners can’t reap the benefits of increased property value until a sale, a strategically executed lease can provide consistent cash flow. Because of its reliability and built-in rent escalations, it offers an attractive stream of revenue for many owners. This is particularly true in CRE, which typically has longer lease terms than residential real estate.

Nonrenewable Resource

Construction is continuously happening, whether it be new developments, value-add renovations, etc. But the land that these properties sit on is a finite resource, making it more valuable over time. Stricter zoning laws across the country also add to this benefit.

Ability to Leverage

Real estate is a tangible asset, allowing it to serve as collateral for loans. Holding an asset like this makes it easier to secure funding for other investment opportunities, which can be crucial if you are a firm looking to scale by leveraging your CRE equity positions.

Diversification and Risk Management

A key part of financial security is diversification. Adding CRE to a portfolio can help to mitigate an owner’s risk of burning cash across all of its investments, especially since it offers a variety of options:

      1. Industrial
      2. Retail
      3. Multifamily
      4. Office 
      5. Hotel
      6. Special Purpose 

Alternative Real Estate Investments

If a direct real estate investment feels daunting, there are a number of other options, allowing companies and individuals to pick and choose the risk associated with the investment. 

  • Real Estate Investment Trusts (REITs): Individuals can purchase stock in a REIT, whether publicly  traded or non-traded, allowing them to enjoy the benefits of ownership without actually buying, managing, and maintaining the properties themselves.
  • Exchange Traded Funds (ETFs): Investors in ETFs receive a bundle of assets that can be bought and sold in the stock market. Typically, these are a grouping of REIT securities, like the ones mentioned above
  • Crowdfunding: With CRE crowdfunding, a group of individuals contribute funds to finance a larger commercial project. Investors must be accredited by the Securities and Exchange Commission (SEC) to take part. 
  • Direct-to-Consumer (DTC): Platforms exist, such as Fundrise, that blend private equity and fintech, allowing for individuals to invest in “real estate stakes” at an extremely low cost without accreditation. In juxtaposition to historical barriers to entry that gave institutions the leg up in this area, Fundrise gives individuals access to the best investments. 

In an ever-changing economic landscape, commercial real estate stands firm as a cornerstone for achieving long-term financial success and stability. The advantages of steady cash flow, appreciating property values, and diversification provide evidence to this truth.

Strategic property acquisitions continue to be a key tactic in Premiere’s success. Our portfolio includes industrial outdoor storage, self-storage, retail, and mixed-use developments. We will continue to find ways to grow this creatively, even in a challenging market.