Report: Investing in Commercial Real Estate is a Key to Revitalizing Local Communities
Many Americans believe that the development and investment in commercial real estate is critical to improving their local communities, according to The RealtyShares Commercial Real Estate Investing Survey, conducted online among over 2,000 U.S. adults in December 2017 by Harris Poll on its behalf. Results show that one-quarter of U.S. adults (25%) feel commercial real estate investment has the biggest impact on enhancing the reputation of a community.
The survey found that more than half of all Americans (53%) would invest in commercial real estate within their communities if given a chance, and 60 percent said their local government should be doing more to attract commercial real estate investment into their communities.
Southborough, Massachusetts’ Economic Development Council’s chair, Dave McKay, agrees, telling his local paper: “I believe that businesses and residents want the same thing – amenities. They want coffee shops, restaurants and bike trails – things that enrich day-to-day life in a town center.”
According to our survey, 70 percent of Americans prefer local shops to national chains, and despite the perception of a growing push towards urbanization, we feel both cities and suburbs may have a need for increased commercial investment as they can potentially:
- Create a thriving economy
- Add new jobs
- Keep young adults engaged and active in the community
- Revitalize local spaces
- Reduce taxes
From New York City to San Antonio, Detroit to Brookfield, Wisconsin and countless other locations, big and small, governments and citizens alike appear to view active commercial real estate markets as a sign of health.
Millennials Are More Motivated to Invest in Real Estate Than You Think
Millennials are poised to take over the workforce and replace the retiring baby boomer generation, but as their wealth starts to accumulate, it’s becoming clear that their investment habits are not quite the same as the generations before them. According to BlackRock’s 2017 Annual Global Investor Pulse Survey, young investors estimated that they held an average of 65 percent of their investment portfolio in cash. A Legg Mason Global Asset Management survey earlier this year reported that millennials had just 15 percent of their investment holdings in equities. Does real estate still factor in as an investment vehicle for millennials?
The data from our RealtyShares Commercial Real Estate Investing Survey says there is a significant appetite among millennials for commercial real estate compared to other groups. We found that 67 percent of Americans ages 18-34 would invest in local commercial real estate, if given a chance. The number is even higher amongst millennial men — 77 percent of whom would participate. Compare that to folks 65 and older, where the percentage of interested potential local commercial real estate investors drops to 36 percent.
So why do so many Americans believe investing in commercial real estate is an attractive option? Based on responses from those who have invested:
- 49 percent reported that it was a good diversification option
- 32 percent indicated its lower risk compared to other types of investments
- 20 percent noted that a friend/family member participates in commercial real estate investing and asked for capital.
We believe there is another motivating factor: community means something to millennials and they have an innate desire to make it better. According to the Zen Master of Marketing, Shama Hyder, millennials want to be inspired and put their money where their personal interests lie. Our survey showed that 73 percent of millennials prefer local shops over national chains, 63 percent of millennials wish there were more commercial real estate investment opportunities in their communities, and 62 percent believe their local government should be doing more to attract those opportunities.
Given millennials’ sentiment towards real estate investing, the question becomes not whether millennials want to invest in local commercial real estate, but why are more millennials not already doing so?
Access is the most significant barrier to commercial real estate investment
The hesitation for individuals to jump into local commercial real estate stems from two things: perceived lack of funds and access. Of those who have never invested in commercial real estate, 61 percent thought they couldn’t afford to, and 19 percent simply didn’t know how.
Those Americans are precisely who RealtyShares is targeting. Through our investing platform, individual investors have access to office, hospitality, healthcare, multi-family, retail, and industrial projects in communities all across the country. These middle market commercial opportunities (valued below $50 million) account for nearly 80 percent of all commercial real estate transactions nationally according to Real Capital Analytics, yet the investing process has traditionally been fragmented and opaque.
RealtyShares is streamlining the relationship between commercial real estate operators needing capital and those looking to invest, giving access to hundreds of investment opportunities that would have been unavailable to them in the past. By developing a comprehensive suite of tools that include dashboards, machine learning and predictive modeling to augment the human element of real estate sourcing and underwriting, those interested can browse several opportunities and start investing for as little as $5,000.
Investor Case Study: Kevin Whattoff
RealtyShares investor Kevin Whattoff has experienced some of the common challenges around access. Decades ago he met a pair of real estate professionals by chance at the restaurant he managed, resulting in a partnership that made several investments in Arizona. Kevin’s career took him away from the Copper State, and despite his high regard for real estate, he could never replicate the opportunities that stemmed from that spontaneous connection.
This changed when Kevin’s father introduced him to RealtyShares in early 2017. Through the RealtyShares platform, he was able to get back into real estate investing without being reliant on finding partners. He’s since invested in dozens of new commercial opportunities, with four local projects in Florida, where he now resides. These deals, each with different sponsors, were in his backyard, and he may not have had access to them without RealtyShares.
For those with skin to put in the game, how do you know where to put it? Eighty percent of Americans do not personally know a commercial real estate investor or developer according to our survey. In an industry that has traditionally relied upon relationships to get your foot in the door, it makes sense that only 11 percent of the population has invested despite the demand.
Using our platform, people can easily search for and learn about projects, and like Kevin, maybe connect with developers in their region. Investors can also get involved for far less upfront cost. The minimum to start investing on our platform is $5,000, allowing investors access to projects with a much lower barrier to entry.
With more than $700 million deployed for projects across 39 states, we’ve taken on the task of revitalizing communities around the country through commercial real estate investment, but it’s only the first step in fulfilling the demand and interest in this multi-billion dollar asset class.
This survey was conducted online within the United States by Harris Poll on behalf of RealtyShares from December 1 through December 5, 2017 among 2066 U.S. adults ages 18 and older. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact David Claffey <firstname.lastname@example.org>.
The RealtyShares investment vehicles discussed above still carry significant risk. All of the investments offered by RealtyShares are private offerings, exempt from registration with the SEC, and the disclosures are less detailed than would be expected from a registered public offering. Ongoing disclosure requirements are negligible. The investments are also illiquid, with undetermined holding periods and no real preset liquidity terms. These offerings are also only available to accredited investors, so the illiquid nature of any investment is heightened – further emphasizing the differences of these securities compared to registered, publicly-traded securities. Testimonials may not be representative of the experience of other customers and are no guarantee of future performance or success.