Why would a private investor need commercial real estate
What non-residential premises is now profitable to purchase for a private investor? How to choose the right building and which tenant to rely on? And why do developers have illiquid buildings become more expensive than apartments in the same residential complex?
The experts discussed these and other issues at the round table “Investments in commercial real estate” organized by the “Real Estate Bulletin”.
Against the background of falling returns on investment in housing under construction, a private investor is increasingly paying attention to other formats of real estate. One of the most popular is the purchase of non-residential premises as part of residential complexes under construction or commissioned. Such settings are used for street retail format – grocery stores, candy stores, bakeries, alcohol markets, construction goods stores, as well as for catering and service industries – dentistry rooms, beauty salons, communications, etc.
Actually, investors have few options: purchase an installation for subsequent resale, profit from renting or to organize their own business there. According to Inna Koshelkova, head of commercial real estate at NAI Becar, about 60-70% of such investors are individuals. And the share of mortgages in transactions with built-in can reach up to 50%.
The use of borrowed funds is due to a rather high entrance ticket compared to the housing market. Most experts call the minimum investment threshold of 10 million rubles, that is, an amount comparable to the cost of two apartments. But most often without 20-30 million rubles. this market is indispensable. Mostly investors hunt for small-sized premises, the most popular objects – an area of 100-150 square meters. m. The developers themselves are not always small and often offer large sections for purchase – 1-2 thousand squares.
In any case, experts promise a return on investments in buildings twice as high as on investments in housing – 9-10% per annum. Some experts call the figures 12-14% per annum. The larger the object, the more profit can be made from it by planting more tenants there. “The return on investment in the construction ideally is eight to nine years. This is with all expenses for depreciation, indexation taking into account inflation, etc. But this applies only to highly liquid objects, which are very few on the market, ”warns Anna Zhilina, head of the commercial real estate department at Etazhi.
INVESTOR IN A PANIC
According to experts, the embedded segment is now experiencing increased investor attention. Compared to the housing market, the future of which is still obscure due to legislative reforms, investments in commercial premises are more understandable for private owners. The most liquid non-residential buildings are acquired at the zero stage, in the popular locations of non-purchased extensions there is no remaining during the construction phase of the residential complex.
The increase in prices in new buildings turned around the rise in price of non-residential objects. Almost all developers announced an increase in prices for commercial premises. “Last year, in one of the largest residential complexes, buildings could be bought at 120 thousand rubles. per sq. m. Now there objects are already offered at 200 thousand rubles. per sq. m – it became of no interest to investors, ”said Alexander Rodionov, Director of Rent Plus.
“Developers respond very slowly to trends in the commercial real estate market. They look at housing, which is becoming more expensive, and extrapolate the same trend to built-in commercial premises. As a result, even the most illiquid objects are already higher than apartments in the same house. ”
According to Inna Koshelkova, prices for built-in commercial premises are now growing without reference to rental rates at which these premises can actually be rented out. “As a result, investors have to artificially increase rates, which the business cannot withstand. Hence the large rotation of tenants, ”the expert explains. According to her, the gap between the expectations of the investor and the real level of rates can now reach up to 50%. Simply put, they expected to hand over 2 thousand rubles. per sq. m, and the output is only 1.0-1.2 thousand rubles. per sq. m
“The market demand is great, private investors are running in a panic and looking for where to invest. Owners of commercial premises are also responding to the hype: they keep prices high and trade with great difficulty. Only after the entry into force of norms 214-FZ this summer, when there will be more certainty with the housing market, will everything return to normal, ”said Anna Zhilina. In the meantime, the margin of investments in non-residential facilities is reduced, and the payback period has set a course for an increase of up to 12-13 years.