Up front, commercial redevelopers have to pour a lot of money into their projects. Often these properties span 50K square feet or more. They become the central point for business districts in cities across America.
Today’s redevelopment projects are largely multi-use, combining residential with retail and office. When investors back smart redevelopment projects, the returns are much higher than say a residential property alone. Besides revitalizing entire communities, commercial redevelopment is a win for investors.
Increases the Long Term Value of Property
A typical home remodel will improve the value of the property by at least 10% and most times, much more. When it comes to revitalizing an already existing commercial property through a redevelopment, property values skyrocket; turning once useless eyesores into cash cows for investors with a good eye.
All property values go up including residential property and commercial space which is located near successful commercial redevelopments. Over the long term, investors can either cash out for a very handsome profit or stay in and enjoy long term dividends.
Brings In Higher Returns While Stimulating Local Economies
Many of the most positive metrics of the economy improve when a new commercial redevelopment goes up. It stimulates individual households. It gives a boost to local businesses, and provides immediate job growth.
In 2018, the top state economies in the U.S. are all seeing enormous investments in commercial redevelopment. Most people think that the worst economy in the Union is Mississippi, which is near the bottom but it is actually the two Dakotas (North and South) which, according to a recent survey by Business Insider, have the worst state economy this year.
The states with the best economies are not world famous New York State or the 5th largest economy in the world, California (although California is in the top 10 at number 7). They are states that have gone all-in on commercial redevelopment of their business districts and secondary cities:
Washington State, Colorado, and Texas make up the top three performing economies due largely to the commercial redevelopment booms happening there. They are all seeing higher wages (Washington) and low unemployment (Colorado), as well as GDP growth above 5% (Texas).
A Critical Exit Strategy for Investors
Banks want to unload underperforming or underwater commercial loans. Many states have areas of extreme dilapidation in small towns and big cities where there are commercial foreclosures. Commercial redevelopers give investors a place to put their money while reaping massive returns that can pay out for years to come.
Some investors are in it for the long term benefits. Others want to invest and then sell at a profit. Since redevelopment involves already existing buildings in need of revitalization, investors often purchase the physical asset for cheap and have many options for developing a strong exit strategy.